TIDM31PE
RNS Number : 6751Z
Canary Wharf Finance II PLC
15 September 2022
CANARY WHARF FINANCE II PLC
15 SEPTEMBER 2022
PUBLICATION OF THE HALF YEARLY FINANCIAL REPORT FOR THE 6
MONTHSED 30 JUNE 2022
Pursuant to sections 4.2 and 6.3.5 of the Disclosure and
Transparency Rules, the board of Canary Wharf Finance II plc is
pleased to announce the publication of its half yearly financial
report for the 6 months ended 30 June 2022, which will shortly be
available from
https:group.canarywharf.com/about-us/investors/canary-wharf-finance-ii-plc.
The information contained within this announcement, which was
approved by the board of directors on 15 September 2022, does not
comprise statutory accounts within the meaning of the Companies Act
2006 and is provided in accordance with section 6.3.5(2)(b) of the
Disclosure and Transparency Rules.
In compliance with the Listing Rule 9.6.1, a copy of the 30 June
2022 half yearly financial report will be submitted to the UK
Listing Authority via the National Storage Mechanism and will
shortly be available to the public for inspection at
www.fca.org.uk/markets/primary-markets/regulatory-disclosures/national-storage-mechanism.
Dated: 15 September 2022
Contact for queries:
J J Turner
Company Secretary
Canary Wharf Finance II plc
Telephone: 020 7418 2000
INTERIM MANAGEMENT STATEMENT
This interim management statement relates to the 6 months ended
30 June 2022 and contains information that covers the period from 1
January 2022 to 15 September 2022, the date of publication of this
interim management statement.
BUSINESS REVIEW
The company is a subsidiary of Canary Wharf Group plc, Canary
Wharf Group Investment Holdings plc, and its ultimate parent
undertaking is Stork Holdco LP, an entity registered in
Bermuda.
The company is a finance vehicle that issues securities which
are backed by commercial mortgages over properties within the
Canary Wharf estate. The company is engaged in the provision of
finance to the Canary Wharf Group, comprising Canary Wharf Group
plc, the ultimate parent undertaking Stork Holdco LP and the wider
group subsidiaries. References to 'the Group' and 'Canary Wharf
Group' refer to Stork Holdco LP and its subsidiaries. All
activities take place within the United Kingdom.
At 30 June 2022, the company had GBP1,370,199,520 (31 December
2021 - GBP1,384,862,120) of notes listed on the London Stock
Exchange and had lent the proceeds to a fellow subsidiary
undertaking, CW Lending II Limited ('the Borrower') under a loan
agreement ('the Intercompany Loan Agreement'). The notes are
secured on a pool of properties at Canary Wharf, owned by fellow
subsidiary undertakings, and the rental income therefrom.
Results for the period
As shown in the company's Income Statement, the company's loss
after tax for the 6 month period was GBP4,948,001 (period ended 30
June 2021 - loss of GBP4,929,325).
This loss included hedge reserve recycling recognised in the
Income Statement of GBP5,005,643 (period ended 30 June 2021 -
GBP4,987,552). Including the hedge reserve recycling impact in
other comprehensive income the profit for the period was GBP57,642
(period ended 30 June 2021 - GBP58,227).
The balance sheet shows the company's financial position at the
period end and indicates that net assets were GBP5,591,392 (31
December 2021 - GBP5,533,750).
The weighted average maturity of the company's securitised debt
is 10.5 years (31 December 2021 - 10.8 years). The weighted average
interest rate of the securitised debt is 6.1% (31 December 2021 -
6.1%).
In the opinion of the Board, these Financial Statements enable
shareholders to make an informed assessment of the results and
activities of the company for the period ended 30 June 2022.
PRINCIPAL RISKS AND UNCERTAINTIES
The risks and uncertainties facing the business are monitored
through continuous assessment, regular formal reviews and
discussion at the Canary Wharf Group Investment Holdings plc audit
committee and board. Such discussion focuses on the risks
identified as part of the system of internal control which
highlights key risks faced by the Group and allocates specific day
to day monitoring and control responsibilities as appropriate. As a
member of Canary Wharf Group, the current key risks of the company
include, the cyclical nature of the property market, concentration
risk and financing risk.
Cyclical nature of the property market
The valuation of the Company and Group's assets are subject to
many other external economic and market factors. In recent years,
the London real estate market has had to cope with fluctuations in
demand caused by key events such as the uncertainty in the Eurozone
and the implications of the UK's withdrawal from the EU. The full
impact of the Russian invasion of Ukraine and sanctions imposed on
Russia as a consequence and of the coronavirus is not yet possible
to predict. The real estate market has to date, however, been
assisted by the depreciation of sterling since the EU referendum
and the continuing presence of overseas investors attracted by the
relative transparency of the real estate market in London which is
still viewed as both relatively stable and secure. Previous
Government announcements, in particular the changes to stamp duty
underpinned continuing demand in the residential market and the
value of the Group's development sites. Property valuations for
office properties let on long leases to tenants with good covenants
have remained relatively strong despite continuing economic
uncertainties which are unhelpful to confidence across the wider
real estate sector.
Concentration risk
The Group's real estate assets are currently located on or
adjacent to the Estate. Although a majority of tenants have
traditionally been linked to the financial services industry, this
proportion has now fallen to around only 50% of tenants. Wherever
possible steps are still taken to mitigate or avoid material
consequences arising from this concentration.
Although the focus of the Group has been on and around the
Estate, where value can be added the Group will also consider
opportunities elsewhere. The Group is involved as construction
manager and joint development manager in the joint venture with
Qatari Diar to redevelop the Shell Centre in London's South Bank.
The Group has also reviewed current consents for development to
react to changes in the market. This review has led to an increased
focus on the residential build to rent sector as reflected in the
composition of the master plan for the mixed use development at
Wood Wharf.
Financing risk
The broader economic cycle inevitably leads to movements in
inflation, interest rates and bond yields. The company has
borrowing at floating and fixed rates of interest. Where required
the company uses derivative financial instruments to manage
exposure to interest rate fluctuations.
The company has issued debenture finance in sterling at both
fixed and floating rates and uses interest rate swaps to modify its
exposure to interest rate fluctuations. All of the company's
borrowings are fixed after taking account of interest rate hedges.
All borrowings are denominated in sterling and the company has no
intention to borrow amounts in currencies other than sterling.
The company enters into derivative financial instruments solely
for the purposes of hedging its financial liabilities. No
derivatives are entered into for speculative purposes.
The company is not subject to externally imposed capital
requirements.
The company's securitisation is subject to a maximum loan minus
cash to value ('LMCTV') ratio covenant.
The maximum LMCTV ratio is 100.0%. Based on the 30 June 2022
valuations of the properties upon which the company's notes are
secured, the LMCTV ratio at the interest payment date in July 2022
was 42.7%. The securitisation is not subject to a minimum interest
coverage ratio. A breach of certain financial covenants can be
remedied by depositing eligible investments (including cash).
DIRECTOR'S RESPONSIBILITY STATEMENT
The board of directors, comprising Sheikh Khalifa Al-Thani,
Theodor Berklayd, Sir George Iacobescu CBE, Shoaib Z Khan, Katy J
Kingston (alternate director to Shoaib Z Khan), Jeremy J Turner
(alternate director to Sir George Iacobescu) and Rebecca J
Worthington, confirms to the best of its knowledge that:
-- the condensed set of financial statements which has been
prepared in accordance with the applicable set of accounting
standards give a true and fair view of the assets, liabilities,
financial position and profit or loss of the company as required
by Rule 4.2.4 of the Disclosure and Transparency Rules of
the United Kingdom's Financial Conduct Authority (the 'DTRs');
and
-- the interim management statement includes a fair review of
the information required by Rule 4.2.7 of the DTRs (indication
of important events during the first 6 months and description
of principal risks and uncertainties for the remaining 6
months of the year).
INCOME STATEMENT
for the 6 months ended 30 June 2022
Audited Unaudited Unaudited
year ended 6 months 6 months
31 December ended ended
2021 30 June 2022 30 June 2021
GBP Note GBP GBP
------------- ------------- -------------
(72,999) Administrative expenses (12,360) (11,460)
------------- ------------- -------------
(72,999) OPERATING LOSS (12,360) (11,460)
83,144,521 Interest receivable 2 40,700,198 41,610,913
(92,990,408) Interest payable 3 (45,635,839) (46,528,778)
------------- ------------- -------------
(9,918,886) LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION (4,948,001) (4,929,325)
- Tax on loss on ordinary activities 4 - -
------------- ------------- -------------
(9,918,886) LOSS ON ORDINARY ACTIVITIES AFTER TAXATION FOR THE PERIOD/YEAR (4,948,001) (4,929,325)
------------- ------------- -------------
OTHER COMPREHENSIVE INCOME
9,984,111 Hedge reserve recycling 5,005,643 4,987,552
9,984,111 OTHER COMPREHENSIVE INCOME FOR THE PERIOD/YEAR 5,005,643 4,987,552
---------- ---------- ----------
65,225 TOTAL COMPREHENSIVE INCOME FOR THE PERIOD/YEAR 57,642 58,227
---------- ---------- ----------
All amounts relate to continuing activities in the United
Kingdom.
The Notes numbered 1 to 8 form an integral part of this Half
Yearly Financial Report.
The Half Yearly Financial Report for the 6 months ended 30 June
2022 was approved by the Board of Directors on 15 September
2022.
STATEMENT OF FINANCIAL POSITION
as at 30 June 2022
Audited Unaudited Unaudited
31 December 30 June 30 June
2021 2022 2021
GBP Note GBP GBP
---------------- ---------------- ----------------
CURRENT ASSETS
Debtors: 5
1,592,708,302 Amounts falling due after one year 1,405,445,743 1,615,808,366
51,682,572 Amounts falling due within one year 50,751,752 50,429,644
3,720,537 Cash at bank 3,374,335 3,671,989
---------------- ---------------- ----------------
1,648,111,411 1,459,571,830 1,669,909,999
Creditors:
(49,869,359) Amounts falling due within one year 6 (48,534,594) (48,574,881)
---------------- ---------------- ----------------
1,598,242,052 NET CURRENT ASSETS 1,411,037,236 1,621,335,118
---------------- ---------------- ----------------
TOTAL ASSETS LESS CURRENT
1,598,242,052 LIABILITIES 1,411,037,236 1,621,335,118
Creditors:
(1,592,708,302) Amounts falling due after more than one year 7 (1,405,445,844) (1,615,808,366)
---------------- ---------------- ----------------
5,533,750 NET ASSETS 5,591,392 5,526,752
---------------- ---------------- ----------------
CAPITAL AND RESERVES
50,000 Called up share capital 50,000 50,000
(137,072,876) Hedging reserve (132,067,233) (142,069,435)
142,556,626 Retained earnings 137,608,625 147,546,187
---------------- ---------------- ----------------
5,533,750 SHAREHOLDER'S FUNDS 5,591,392 5,526,752
---------------- ---------------- ----------------
The Notes numbered 1 to 8 form an integral part of this Half
Yearly Financial Report.
STATEMENT OF CHANGES IN EQUITY
for the 6 months ended 30 June 2022
Called up
share Hedging Retained
capital reserve earnings Total
GBP GBP GBP GBP
---------- -------------- ------------ ------------
At 1 January 2021 50,000 (147,056,987) 152,475,512 5,468,525
Loss for the period - - (4,929,325) (4,929,325)
Other comprehensive income - 4,987,552 - 4,987,552
---------- -------------- ------------ ------------
Total comprehensive income - 4,987,552 (4,929,325) 58,227
---------- -------------- ------------ ------------
At 30 June 2021 50,000 (142,069,435) 147,546,187 5,526,752
---------- -------------- ------------ ------------
Loss for the period - - (4,989,561) (4,989,561)
Other comprehensive income - 4,996,559 - 4,996,559
---------- -------------- ------------ ------------
Total comprehensive income - 4,996,559 (4,989,561) 6,998
---------- -------------- ------------ ------------
At 31 December 2021 50,000 (137,072,876) 142,556,626 5,533,750
---------- -------------- ------------ ------------
Loss for the period - - (4,948,001) (4,948,001)
Other comprehensive income - 5,005,643 - 5,005,643
---------- -------------- ------------ ------------
Total comprehensive income - 5,005,643 (4,948.001) 57,642
---------- -------------- ------------ ------------
At 30 June 2022 50,000 (132,067,233) 137,608,625 5,591,392
---------- -------------- ------------ ------------
The Notes numbered 1 to 8 form an integral part of this Half
Yearly Financial Report.
NOTES TO THE INTERIM REPORT
for the 6 months ended 30 June 2022
1. ACCOUNTING POLICIES
The statutory accounts have been prepared in accordance with
Financial Reporting Standard (FRS) 102 "The Financial Report
Standard applicable in the UK and Republic of Ireland".
Accordingly, this condensed set of financial statements has been
prepared in accordance with FRS 104 "Interim Financial
Reporting".
The accounting policies applied in the preparation of this
Interim Report are consistent with those that will be adopted in
the statutory accounts for the year ending 31 December 2022. The
full accounting policies of the company, set out in the 2021
statutory accounts, have been applied in preparing this Interim
Report.
The financial information relating to the 6 months ended 30 June
2022 and 30 June 2021 is unaudited.
The results for the year ended 31 December 2021 are not the
company's statutory accounts. A copy of the statutory accounts for
the year has been delivered to the Registrar of Companies. The
auditor's report on those accounts was not qualified, did not
contain any reference to any matters which the auditor drew
attention by way of emphasis without qualifying the report and did
not contain statements under Section 498(2) or (3) of the Companies
Act 2006.
In accordance with FRS 102, the company will be exempt from
presentation of cash flow statement in its next annual financial
statements as it will be included in the consolidated financial
statements of Canary Wharf Group Investing Holdings plc, and
accordingly the company has taken an equivalent exemption in
preparing these condensed interim financial statements.
Replacement of LIBOR as an interest rate benchmark
From 24 January 2022, LIBOR has been replaced by SONIA (Sterling
Overnight Index Average) as the Risk Free Reference Rate for
Sterling Transactions. The Group has obtained its lenders approval
to adopt SONIA from 24 January 2022 for all LIBOR related loans,
plus a Credit Adjustment Spread. This has not resulted in any
changes to group's financial instrument effectiveness.
2. INTEREST RECEIVABLE AND SIMILAR INCOME
Audited Unaudited Unaudited
year ended 6 months 6 months
31 December ended ended
30 June
2021 2022 30 June 2021
GBP GBP GBP
------------ ----------- -------------
- Bank interest receivable 261 -
Interest receivable from
83,144,521 Group undertakings 40,699,937 41,610,913
------------ ----------- -------------
83,144,521 40,700,198 41,610,913
------------ ----------- -------------
3. INTEREST PAYABLE AND SIMILAR CHARGES
Audited Unaudited Unaudited
year ended 6 months 6 months
31 December ended ended
30 June
2021 2022 30 June 2021
GBP GBP GBP
------------ ----------- -------------
Interest payable on securitised
83,006,297 debt (Note 7) 40,630,196 41,541,226
- Fair value adjustments - -
9,984,111 Hedge reserve recycling 5,005,643 4,987,552
------------ ----------- -------------
92,990,408 45,635,839 46,528,778
------------ ----------- -------------
Included within interest payable on securitised debt is
GBP800,129 (June 2021 - GBP847,749) amortisation of issue
premium.
Fair value adjustments
Audited Unaudited Unaudited
year ended 6 months 6 months
31 December ended ended
30 June
2021 2022 30 June 2021
GBP GBP GBP
------------- -------------- -------------
(88,290,467) Derivative financial instruments (139,717,378) (65,561,091)
35,880,164 Securitised debt (31,470,817) 20,140,561
Loan to fellow subsidiary
52,410,303 undertaking 171,188,195 45,420,530
------------- -------------- -------------
- - -
------------- -------------- -------------
4. TAXATION
Audited Unaudited Unaudited
year ended 6 months 6 months
31 December ended ended
30 June
2021 2022 30 June 2021
GBP GBP GBP
------------ ------------ -------------
Tax charge
Current tax chargeable to
- income - -
------------ ------------ -------------
- - -
------------ ------------ -------------
Tax reconciliation
Loss on ordinary activities
(9,918,886) before taxation (4,948,001) (4,929,325)
------------ ------------ -------------
Tax on loss at UK corporation
1,884,588 tax rate 940,120 936,572
Effects of:
(1,896,981) Fair value movements (951,072) (947,635)
12,393 Group relief 10,952 11,063
------------ ------------ -------------
- - -
------------ ------------ -------------
5. DEBTORS
Audited Unaudited Unaudited
31 December 30 June 30 June
2021 2022 2021
GBP GBP GBP
-------------- -------------- --------------
Due within one year:
Loan to fellow subsidiary
29,325,200 undertaking 29,325,200 29,325,200
Accrued interest on loan
16,192,846 to fellow subsidiary undertaking 15,540,418 16,235,090
Amounts owed by fellow subsidiary
6,164,526 undertakings 5,886,134 4,869,354
-------------- -------------- --------------
51,682,572 50,751,752 50,429,644
-------------- -------------- --------------
Due after more than one
year:
Loan to fellow subsidiary
1,592,708,302 undertaking 1,405,445,743 1,615,808,366
-------------- -------------- --------------
1,592,708,302 1,405,445,743 1,615,808,366
-------------- -------------- --------------
The loan to a fellow subsidiary undertaking comprises:
Audited Unaudited Unaudited
31 December 30 June 30 June
2021 2022 2021
GBP GBP GBP
-------------- -------------- --------------
1,706,676,001 Brought forward 1,622,033,502 1,706,676,001
(29,325,200) Repaid in period (14,662,600) (14,662,600)
(1,673,865) Amortisation of issue premium (800,128) (847,749)
(1,233,131) Accrued financing expenses (611,636) (611,556)
(52,410,303) Fair value adjustment (171,188,195) (45,420,530)
-------------- -------------- --------------
1,622,033,502 Carried forward 1,434,770,943 1,645,133,566
-------------- -------------- --------------
Payable within one year
29,325,200 or on demand 29,325,200 29,325,200
Payable after more than
1,592,708,302 one year 1,405,445,743 1,615,808,366
-------------- -------------- --------------
1,622,033,502 1,434,770,943 1,645,133,566
-------------- -------------- --------------
The loans to a fellow subsidiary undertaking bear fixed rates of
interest between 5.41% and 7.07% and are repayable in instalments
between 2005 and 2037.
Other amounts owed by Group companies are non-interest bearing
and repayable on demand.
The A7, B3 C2 and D2 tranches of the intercompany loan are
carried at fair value. The A1, A3 and B tranches are carried at
amortised cost. The total fair value of the loans to fellow
subsidiary undertakings at 30 June 2022 was GBP1,537,198,578 (31
December 2021 - GBP1,832,728,937), calculated by reference to the
fair values of the company's financial liabilities. In the event
that the company were to realise the fair value of the securitised
debt and the derivative financial instruments, it would have the
right to recoup its losses as a repayment premium on its loans to
CW Lending II Limited. As such, the fair value of the loans to
Group undertakings is calculated to be the sum of the fair value of
the securitised debt and the fair value of the derivative financial
instruments. The carrying value of financial assets represents the
company's maximum exposure to credit risk.
6. CREDITORS: Amounts falling due within one year
Audited Unaudited Unaudited
31 December 30 June 30 June
2021 2022 2021
GBP GBP GBP
--------------- ----------- -----------
29,325,200 Securitised debt (Note 7) 29,325,200 29,325,200
16,246,891 Accrued interest on debt 15,594,319 16,288,628
11,978 Accounts payable 126,729 -
4,284,594 Amounts owed to Group undertakings 3,477,306 2,952,593
696 Accruals and deferred income 11,040 8,460
--------------- ----------- -----------
49,869,359 48,534,594 48,574,881
--------------- ----------- -----------
Amounts owed to group undertakings are interest free and
repayable on demand.
7. CREDITORS: Amounts falling after more than one year
Audited Unaudited Unaudited
31 December 30 June 30 June
2021 2022 2021
GBP GBP GBP
-------------- -------------- --------------
1,286,124,454 Securitised debt 1,238,579,374 1,286,495,142
306,583,848 Derivative financial instruments 166,866,470 329,313,224
-------------- -------------- --------------
1,592,708,302 1,404,445,844 1,615,808,366
-------------- -------------- --------------
The amounts at which borrowings are stated comprise:
Audited Unaudited Unaudited
31 December 30 June 30 June
2021 2022 2021
GBP GBP GBP
-------------- -------------- --------------
1,311,801,686 Brought forward 1,315,449,655 1,311,801,686
(29,325,200) Repaid in period (14,662,600) (14,662,600)
(1,673,865) Amortisation of issue premium (800,128) (847,749)
(1,233,130) Accrued financing expenses (611,536) (611,556)
35,880,164 Fair value adjustment (31,470,817) 20,140,561
-------------- -------------- --------------
1,315,449,655 Carried forward 1,267,904,574 1,315,820,342
--------------
Payable within one year
29,325,200 or on demand 29,325,200 29,325,200
Payable after more than
1,286,124,455 one year 1,238,579,374 1,286,495,142
-------------- -------------- --------------
1,315,449,655 1,267,904,574 1,315,820,342
-------------- -------------- --------------
The principal terms of the company's borrowings are:
Principal
Tranche GBPm Interest Hedged rate Repayment
--------- ---------- ---------------- ------------ -------------------
By instalment 2009
A1 188.1 6.455% - - 2030
By instalment 2032
A3 400.0 5.952% - - 2035
A7 222.0 SONIA + 0.5943% 5.3985% January 2035
By instalment 2005
B 117.5 6.800% - - 2030
B3 77.9 SONIA + 0.8193% 5.5825% January 2035
C2 239.7 SONIA + 1.4943% 6.2666% January 2035
D2 125.0 SONIA + 2.2193% 7.0605% January 2035
----------
1,370.2
----------
The class A1, A3 and B notes were issued at a premium which is
being amortised to the income statement on a straight line basis
over the life of the relevant notes. At 30 June 2022 GBP11,424,139
(31 December 2021 - GBP12,224,268) remained unamortised.
The notes are secured on 6 properties at Canary Wharf, owned by
fellow subsidiary undertakings, and the rental income stream
therefrom.
The company uses interest rate swaps to hedge exposure to the
variability in cash flows on floating rate debt caused by movements
in market rates of interest. The hedged rates of the floating
notes, including the margins, are between 5.40% and 7.06%.
The floating rate notes are carried at fair value through profit
or loss. The fixed rate notes are carried at amortised cost. The
total fair value of the securitised debt at 30 June 2022 was
GBP1,370,332,108 (31 December 2021 - GBP1,526,145,089). The fair
values of the sterling denominated notes have been determined by
reference to prices available on the market on which they are
traded.
At 30 June 2022, the fair value of the interest rate derivatives
resulted in the recognition of a liability of GBP166,866,470 (31
December 2021 - GBP306,583,848). The fair values of the derivative
financial instruments have been determined by reference to the
market values provided by a third party valuer.
The securitisation continues to have the benefit of an
arrangement with AIG which covers the rent in the event of a
default by the tenant of 33 Canada Square over the entire term of
the lease. At 30 June 2022, AIG had posted GBP82,605,176 as cash
collateral in respect of this obligation.
The company also has the benefit of a GBP300 million liquidity
facility provided by Lloyds Bank plc, under which drawings may be
made in the event of a cash flow shortage under the securitisation.
The liquidity facility matures on 22 October 2037 and at 30 June
2022 remains undrawn.
8. CONTINGENT LIABILITIES AND FINANCIAL COMMITMENTS
As at 30 June 2022 and 31 December 2021, the company had given
security over all its assets, including security expressed as a
first fixed charge over its bank accounts, to secure the notes
referred to in Note 7.
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