Ralph Percy, the current of Duke of Northumberland, dates his family nobility back to the Harrying of the North in 1069. He owns Alnwick Castle — the second largest castle in occupation after Windsor. Alnwick stood in for Hogwarts in the Harry Potter films and parts of Downton Abbey were filmed there too, as was Robin Hood Prince of Thieves.
Northumberland Estates' deal was arranged by Independent Debt Capital Markets (IDCM), an independent advisory firm in London. According to market sources, there were four investors in the final syndicate; three from the UK and one from the US. Tranches ranged from 20 to 40 years, with an average coupon of 2.1% and primary covenants around gearing. The deal, which was unsecured and intended to refinance bank debt, had a spread of 130bp over Gilts.
The borrower has a large portfolio of commercial real estate, with about 410 properties in the UK as well as others in Germany, Switzerland and North America. It also owns Syon House and Park in west London, as well as an extensive art collection.
Northumberland is the last in a line of grand noble houses to issue private placements. The Duchy of Cornwall, one of the two royal duchies in England, last year issued £105m of debt maturing in 2059 and 2069, at coupons of 2.68% and 2.73%. Blenheim Palace, the estate of the Duke of Marlborough, sold a £30m 3.62% 30 year private placement in March 2019.
"The private placement market has carved out a niche as a go-to place for unique old English borrowers, looking to move out of bank debt," said a UK agent, who has taken a few esoteric credits to the market.
The National Trust, the charity that looks after UK historic buildings and landscapes, has also sold PPs. Last month, the Royal College of Surgeons England sold £40m of 30 year private placements.
“Investors here are certainly interested in the weird, the posh and the wonderful, but usually because they have very strong credit metrics,” said an investor in London, who was aware of Northumberland Estates' deal. “US investors are well acquainted with esoteric credits — many of the livery companies have issued, as well as bodies like Lloyd’s of London and the English public schools like Eton and Charterhouse.”
Other estates are regular borrowers in private markets. Those primarily in London, such as Grosvenor, Portland and Howard de Walden, are well known among institutional investors and are regular borrowers in private debt markets. “US institutions are all over those London ones but those outside of London are a little harder to gauge,” said an arranger away from this deal, who added that it was encouraging that Northumberland had a US investor in the book. “Obviously with this though, it’s a pretty unique one.”