Issue of Equity

RNS Number : 7388X

Capital & Regional plc

20 August 2009

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, TO US PERSONS OR IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA, SOUTH AFRICA OR JAPAN.

20 August 2009

Capital & Regional PLC

Proposed Parkdev Firm Placing and Firm Placing and Placing and Open Offer to raise gross proceeds of £69.2 million

The Board of Capital & Regional Plc ("C&R" or the "Company" or the "Group") today announces its intention to raise gross proceeds of £69.2 million by way of a placing of New Ordinary Shares in the Company. The Capital Raising is divided between:

£23.5 million through a Firm Placing to Parkdev and related investors ("Parkdev"). Parkdev is a specialist property and asset management company based in South Africa

Following the transaction, Parkdev's investment will result in a proforma shareholding in the enlarged Group of 25.4% of the enlarged issued share capital
The Board would like to welcome the Parkdev investors as long-term supportive shareholders
Price of 26.4 pence per share, a discount of 73.1% to the closing share price on 19 August 2009 of 98.0 pence, a 55.3% discount to 1 month VWAP of 59.1 pence per share and an 18.4% discount to the pro forma triple net asset value of 32.4 pence per share
Issue of 89.0 million New Ordinary Shares

£45.7 million through a fully underwritten Firm Placing and Placing and Open Offer to institutional investors and existing shareholders

Split 25% under the Firm Placing to Firm Placees, and 75% through the Placing and Open Offer to Placees subject to clawback from existing shareholders
Stapled unit of 1 Firm and 3 Placing and Open Offer shares
Price of 24.0 pence per share, a discount of 75.5% to the share price of 98.0 pence on 19 August 2009, and a 59.4% discount to 1 month VWAP of 59.1 pence per share and a 25.8% discount to the pro forma triple net asset value of 32.4 pence per share
Issue of 190.3 million New Ordinary Shares

Existing shareholders will have the right to purchase 2 New Ordinary Shares for every share held in the Open Offer and existing shareholders will be given priority in allocation in the fully underwritten £45.7 million Firm Placing and Placing and Open Offer to investors.

C&R also announces that it has renegotiated a number of its core credit facilities resulting in an increase in headroom under its core banking covenants, interconditional upon the Capital Raising.

The Capital Raising combined with the renegotiated credit facilities, will:

Strengthen C&R's balance sheet to provide a more appropriate capital structure for the business going forward
Give the Group the ability to respond to future investment opportunities
Provide C&R with the support and expertise of Parkdev, its new strategic partner

Allow the Group to focus on its core competencies of the management of complex retail assets in the UK and Germany, and leisure assets in the UK

Commenting on the Capital Raising Tom Chandos, Chairman, said:

"The actions taken since the beginning of the year, including the refinancing of The Junction and X-Leisure funds and culminating in the proposed capital raising and related renegotiation of credit facilities, significantly strengthen the financial position of the Group.

The Group should, as a result, be in a position to exploit its established community retail and leisure asset management skills to enhance the value of existing funds and to take advantage of new opportunities, as markets bottom out and value reappears."

The Directors intend to take up their entitlements in the Open Offer in full, other than Xavier Pullen who will take up New Ordinary Shares with a total Open Offer Price of £350,000, and Kenneth Ford who will take up New Ordinary Shares with a total Open Offer Price of £250,000.

Expected timetable of principal events

Publication of prospectus	Thursday 20 August
Ex-entitlement date for the Open Offer	8.00 a.m. on Thursday 20 August
General Meeting of Shareholders	11.00 a.m. on Monday 7 September
Expected date of announcement of results of the Capital Raising through a Regulatory Information Service	Monday 7 September
Expected date of Admission and commencement of dealings in New Ordinary Shares on the London Stock Exchange and New Ordinary Shares credited to CREST stock accounts (uncertificated holders only)	8.00 a.m. on Thursday 10 September

Background to and reasons for the Capital Raising

The deterioration in global economic conditions since August 2007 and the recession in the UK have given rise to highly volatile property market conditions and a significant fall in the value of commercial property in the UK. As a result, and along with many other UK property companies, the Group has seen a significant reduction in the valuation of the property assets owned by the Funds in which the Group has investments (53.1% for The Mall Fund, 52.2% for The Junction Fund and 37.4% for the X-Leisure Fund like-for-like from 30 June 2007 to 30 June 2009, implying a weighted average decline of 50.3% for the UK). The high level of volatility in property markets has continued to the present time and whilst there have been some recent signs of improvement in sentiment in the property market, values continued to decline during the first half of 2009, albeit at a slower rate than at the end of 2008. The deterioration in the financial markets and the wider macro-economic environment led to concerns amongst investors about the demand for commercial space from occupiers, driving further reductions in property valuations. The lower current valuations have also required the Group and the Funds in which it has invested to obtain waivers of, or to renegotiate, a number of their banking covenants in certain of their credit facilities. The Board believes that the uncertainty around the Group's ability to comply with its banking covenants has been a contributing factor in the fall in the Company's share price.

The Board has continued to review its strategy for the Group. The Board's assessment is that combining the role of property investor and property asset manager in the retail and leisure sectors can generate attractive returns, provided rental and income risks can be managed. It recognises, however, that leverage at both the Group and Fund level has a significant impact on NAV. Management's priority to date has therefore been to take the necessary steps to put the Group on a more stable financial footing.

The Board believes that the actions taken over the past 18 months have contributed significantly to strengthen the financial position of the Group. Although sentiment in both investment and tenant markets continued to deteriorate in the second quarter of 2009 and the property markets continue to be highly volatile, there are some signs that sentiment has now started to improve. With The Junction Fund and the X-Leisure Fund now stabilised, the Board believes that now is the right time to issue equity at the Group level, and to lock in the new banking arrangements that have been agreed. This decision has been reinforced by the opportunity to develop a strategic relationship with Parkdev (see ''Relationship with Parkdev'' below) which not only intends to invest, together with the other Parkdev Investors, £23.5 million in the Parkdev Firm Placing but, in conjunction with its associates, also proposes to introduce opportunities where the Group can further leverage its property asset management capabilities.

In summary, the Board believes that, by raising approximately £62.8 million (net of expenses), increasing the headroom under the Group's banking covenants and renegotiating a number of the Group's credit facilities, the balance sheet will be strengthened, putting the Group in a sound position to maintain its established community retail and leisure asset management operations through the current economic cycle, and providing it with the ability to respond to future investment opportunities either through existing or new retail and leisure funds or joint venture opportunities as they arise.

Capital & Regional has also separately announced today its unaudited results for the six months ended 30 June 2009.

Agreements with lending banks

The Group has entered into the Amended Core Facility Agreement, the Amended GNW Facility Agreement and the Amended LGP Facility Agreement (the Conditional Amended Facility Agreements) with its principal lending bank.

The Amended Core Facility Agreements amends the gearing and asset cover covenants under the Core Facility Agreement, which have been waived by the lender for the period 30 June 2009 to 30 September 2009. Had the Group not obtained such waiver, the Group would have been in breach of its look forward asset cover covenant and close to breach on its gearing covenant under the facility as at 30 June 2009. The Amended Core Facility Agreement also extends the original loan repayment date of the Original Core Facility Agreement to 10 September 2013. The Amended GNW Facility Agreement amends the gearing and LTV covenants under the Original GNW Facility Agreement and extends the original loan repayment date to 10 October 2013.

Principal terms of the Placing and Open Offer

The Open Offer Issue Price of 24.0 pence per Open Offer Share represents a discount of 74.0 pence (75.5%) to the Closing Price of 98.0 pence per Ordinary Share on 19 August 2009 (being the last dealing day prior to announcement of the intention to do the Capital Raising).

Qualifying Shareholders, on and subject to the terms and conditions of the Open Offer, are being given the opportunity to apply for the Open Offer Shares at the Open Offer Issue Price, pro rata to their holdings of Existing Shares on the Record Date, on the basis of:

2 Open Offer Shares for every 1 Existing Share

The Placing and Open Offer is fully underwritten by the Joint Underwriters pursuant to the Sponsors' and Placing Agreement. The Joint Bookrunners have agreed under the Sponsor's Placing Agreement to procure as agent for the Company, acquirers for the New Ordinary Shares not taken up under the Placing and Open Offer or failing that, to acquire such New Ordinary Shares themselves.

Subject to the obligations of the parties under the Sponsors' and Placing Agreement becoming unconditional and (where relevant) to the terms of its placing letter, each placee under the Placing and Open Offer will be entitled to receive a commission equal to 1.75% of the Issue Price multiplied by the number of Open Offer shares which have been conditionally placed with the respective placee, such commission to be paid by (or on behalf of) Capital & Regional.

Application will be made to the UK Listing Authority for the Open Offer Shares to be admitted to the Official List of the UK Listing Authority, and will be made to the London Stock Exchange for the Open Offer Shares to be admitted to trading on the London Stock Exchange's main market for listed securities. It is expected that Admission to the Official List will become effective and that dealings in the Open Offer Shares will commence on the London Stock Exchange at 8.00 a.m. on 10 September 2009.

A prospectus concerning the Capital Raising is being sent to shareholders today. Further details of the Offer are set out in the prospectus which will also be made available on Capital & Regional's website www.capreg.com

The Capital Raising is subject to certain restrictions relating to Qualifying Shareholders with registered addresses or located or resident in countries outside the UK, further details of which will be set out in the prospectus.

References to times in this Announcement are to London time unless otherwise stated.

This summary should be read in conjunction with the full text of this Announcement.

J.P. Morgan Cazenove and Credit Suisse Securities (Europe) Limited are acting as joint sponsors and joint bookrunners to the Capital Raising.

Relationship with Parkdev

The Board is pleased to announce that the Parkdev Investors have agreed to acquire an aggregate of 89.0 million Parkdev Firm Placed Shares, representing 65.2% of the Total Firm Placed Shares being offered. The Board would like to welcome the Parkdev Investors as long-term supportive shareholders.

Parkdev is an asset and property management company based in South Africa with extensive expertise in retail and commercial real estate, and is the property and asset manager of ATTFUND Limited (ATTFUND), an unlisted South African public fund which owns regional shopping centres with total lettable space of 4.5 million sq ft. In addition, ATTFUND co-owns the one million sq ft Nova Eventis shopping centre in Leipzig, Germany, as well as a substantial equity interest in Deutsche Euroshop AG. Parkdev is also the co-manager of Sycom Property Fund, a property unit trust listed on the Johannesburg Stock Exchange. Sycom owns shopping centres and ofﬁces with a total lettable space of 323,000 square metres.

ATTFUND had gross assets of Rand 8.2 billion (approximately £630 million) as at 20 June 2008 and a net asset value of Rand 5 billion (approximately £385 million). ATTFUND has committed €55 million to the launch of Karoo Investment Fund SICAV, which was listed on the Luxembourg Stock Exchange on 29 May 2009. The target size of the Fund is €150 million and it has a mandate to invest in listed and unlisted property companies in, inter alia, the UK and Germany. The Group believes that this provides the opportunity for the Karoo Investment Fund to leverage its property asset management skills in these markets for the beneﬁt of all Shareholders.

In connection with the Parkdev Investors' acquisition of Parkdev Firm Placed Shares and pursuant to the Relationship Agreement that the Parkdev Investors and the Company have entered into, the Company has agreed, upon request, to appoint two non-executive directors, nominated by Parkdev, to the Board for so long as the Parkdev Investors own 20% or more of the issued ordinary share capital in Capital & Regional and one non-executive director to the Board if the Parkdev Investors own less than 20% but not less than 15% of the issued ordinary share capital in Capital & Regional. The Parkdev Investors have agreed not to sell any interests in the ordinary share capital of the Company for 365 days following Admission.

The Capital Reorganisation

In order to maximise the level of distributable reserves arising from the Capital Raising and to provide the Company with flexibility in relation to its capital structure in the future, the Capital Raising is conditional on, amongst other things, the completion of the Capital Reorganisation, which will result in the nominal value of each Ordinary Share being reduced from 10 pence to one penny.

The effect of the Capital Reorganisation will mean that each Ordinary Share will have a nominal value of one penny and the number of Ordinary Shares of the Company listed on the Ofﬁcial List and admitted to trading on the London Stock Exchange's main market for listed securities shall remain the same, subject to the addition of the Parkdev Firm Placed Shares, the Firm Placed Shares and the Open Offer Shares. Consequently, the market price of an Ordinary Share immediately after completion of the Capital Reorganisation should, theoretically, be the same as the market price of an Existing Share immediately prior to the Capital Reorganisation.

- ENDS -

Enquiries:

Capital & Regional PLC
Hugh Scott-Barrett, Chief Executive	Tel: 020 7932 8121
Charles Staveley, Group Finance Director

Credit Suisse Securities (Europe) Limited
Mark Seligman / Chris Byrne	Tel: 020 7888 8888

J.P. Morgan Cazenove (Limited)
Robert Fowlds / James Taylor / Paul Hewlett	Tel: 020 7588 2828

Maitland
Martin Leeburn / Emma Burdett	Tel: 020 7379 5151

Capital Raising and Interim Results presentation

Capital & Regional will be holding a presentation for analysts and investors today at 9.30am GMT at:

Founders' Hall

1 Cloth Fair

London

EC1A 7HT

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, TO US PERSONS OR IN OR INTO THE UNITED STATES, CANADA, JAPAN, AUSTRALIA OR SOUTH AFRICA OR ANY OTHER JURISDICTION WHERE TO DO SO MIGHT CONSTITUTE A VIOLATION OF RELEVANT SECURITIES LAWS OR REGULATIONS OF SUCH JURISDICTION.

THIS ANNOUNCEMENT IS AN ADVERTISEMENT AND NOT A PROSPECTUS AND INVESTORS SHOULD NOT SUBSCRIBE FOR OR PURCHASE ANY SHARES REFERRED TO IN THIS ANNOUNCEMENT PURSUANT TO THE CAPITAL RAISING EXCEPT ON THE BASIS OF INFORMATION IN THE PROSPECTUS TO BE PUBLISHED BY CAPITAL & REGIONAL PLC IN CONNECTION WITH THE PROPOSED CAPITAL RAISING. COPIES OF THE PROSPECTUS WILL, FOLLOWING PUBLICATION, BE AVAILABLE FROM THE COMPANY'S REGISTERED OFFICE DURING NORMAL BUSINESS HOURS.

The statements contained in this Announcement that are not historical facts are "forward-looking" statements. These forward-looking statements are subject to a number of risks and uncertainties, some of which are beyond Capital & Regional Plc's control and all of which are based on Capital & Regional Plc's current beliefs and expectations about future events which may not prove to be accurate. Forward-looking statements are typically identified by the use of forward-looking terminology such as "believes", "expects", "may", "could", "should", "intends", "estimate", "plans", "assumes" or "anticipates" or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy that involve risks and uncertainties. These forward-looking statements and other statements contained in this Announcement regarding matters that are not historical facts involve predictions. No assurance can be given that such future results will be achieved; and actual events or results may differ materially as a result of risks and uncertainties facing Capital & Regional Plc. Such risks and uncertainties could cause actual results to vary materially from the future results indicated, expressed or implied in such forward-looking statements. Save as required by the FSA, the London Stock Exchange or by applicable law, including, without limitation, the Prospectus Rules, the Listing Rules and the Disclosure and Transparency Rules, the Company does not undertake and expressly disclaims any obligation to review, update or confirm expectations or estimates or to release publicly any revisions to any forward-looking statements to reflect events that occur due to any change in the Company's board of directors' expectations, or to reflect circumstances that arise after the date of this Announcement. Forward looking statements, speak only as of the date of this Announcement.

This Announcement is for information purposes only and shall not constitute an offer to buy, sell, issue or subscribe for, or the solicitation of an offer to buy, sell, issue, or subscribe for any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.

This Announcement has been prepared by Capital & Regional Plc (the "Company") whose registered office is at 10 Lower Grosvenor Place, London, SW1W 0EN, United Kingdom. The Company is registered in England and Wales with registered no.1399411. Each of J.P. Morgan Cazenove Limited ("J.P. Morgan Cazenove") and Credit Suisse Securities (Europe) Limited ("Credit Suisse") (together, the "Banks"), is authorised and regulated in the United Kingdom by the FSA and is acting exclusively for the Company in connection with the Capital Raising and not for any other person and will not be responsible to any other person for providing the protections afforded to their respective customers, or for providing advice in relation to the Capital Raising, or for the contents of or matters referred to in this Announcement. Apart from the responsibilities and liabilities, if any, which may be imposed on any of the Banks by FSMA or the regulatory regime established thereunder, none of the Banks accepts any responsibility whatsoever for the contents of this Announcement including its accuracy, completeness or verification or for any other statement in connection with the Company, the New Ordinary Shares or the Capital Raising, and nothing in this Announcement is, or shall be relied upon as, a promise, warranty or representation in any such respect. Accordingly, each of the Banks disclaim, to the fullest extent permissible by law, all and any liability whatsoever, whether arising in tort, contract or otherwise (save as referred to above), which any of them might otherwise have in respect of this Announcement.

The information contained herein is not for publication or distribution, directly or indirectly, to US Persons (as defined in Regulation S under the US Securities Act of 1933, as amended (the "Securities Act")) or in or into the United States of America (including its territories and possessions, any state of the United States and the District of Columbia). These materials do not contain or constitute an offer for sale or the solicitation of an offer to purchase securities to or by US Persons or in the United States. The securities referred to herein (the "Securities") have not been and will not be registered under the Securities Act, and may not be offered or sold in the United States absent registration under the Securities Act or an available exemption from, or transaction not subject to, the registration requirements of the Securities Act. There will be no public offer of the Securities in the United States. These materials do not contain or constitute an offer to sell or a solicitation of an offer to purchase any securities to or by US Persons or in the United States, Australia, Canada, Japan, South Africa or the United Kingdom.

This Announcement has been issued by and is the sole responsibility of Capital & Regional Plc.

Transaction details

Background to and reasons for the Capital Raising

The deterioration in global economic conditions since August 2007 and the recession in the UK have given rise to a significant fall in the value of commercial property in the UK. As a result, and along with many other UK property companies, the Group has seen a significant reduction in the valuation of the property assets owned by the Funds in which the Group has investments (53.1% for The Mall Fund, 52.2% for The Junction Fund and 37.4% for the X-Leisure Fund like-for-like from 30 June 2007 to 30 June 2009, implying a weighted average decline of 50.3% for the UK). Whilst there has been some recent signs of improvement in sentiment in the property market, property markets continue to be highly volatile and values continued to decline during the first half of 2009, albeit at a slower rate than at the end of 2008. The deterioration in the financial markets and the wider macro-economic environment led to concerns amongst investors about the demand for commercial space from occupiers, driving further reductions in property valuations . The lower current valuations have also required the Group and the Funds in which it has investments to obtain waivers of, or to renegotiate, a number of their banking covenants in certain of their credit facilities and the Board believes that the uncertainty around the Group's ability to comply with its banking covenants has been a contributing factor in the fall in the Company's share price.

The Board has continued to review its strategy for the Group. The Board's assessment is that combining the role of property investor and property asset manager in the retail and leisure sectors can generate attractive returns. It recognises, however, that leverage at both the Group and Fund level has a significant impact on NAV. Management's priority to date has therefore been to take the necessary steps to put the Company on a more stable financial footing.

In line with this objective, the Group has taken a number of actions over the last 18 months to de-leverage the Group's balance sheet and strengthen its financial position:

In February 2008, the Group sold an 80% interest in its FIX-UK portfolio to Paradigm Real Estate Managers Ltd and Bank of Scotland Corporate for £32.2 million, representing a 5.8% net initial yield. This transaction removed £120 million of Group debt from the Group's balance sheet.
In August 2008, the Group reached agreement with its principal lending bank for the amendment of the covenants in its Original Core Facility Agreement, to give greater covenant headroom. Under the new terms, only debt with recourse to the Group was included in the look-through gearing covenant, which was set at 200%
In October 2008, the Group sold a 50% interest in its German portfolio to AREA for €65.6 million, representing a 6.25% net initial yield. This transaction removed £374 million of debt from the Group's balance sheet. Net proceeds received by the Group were £42.9 million
In May 2009, the Group completed the sale of its 50% interest in its Cardiff joint venture for £1.2 million, representing an estimated net initial yield of 5.9% on estimated contracted rent. The proceeds were used to pay down existing bank debt and the transaction also released the Company from a bank guarantee. In December 2008, the joint venture had sold the Costco unit for £17 million, representing a 6.1% net initial yield on contracted rent and had used the proceeds to pay down the joint venture's debt
Since late 2008, measures have been taken which should reduce the Group's underlying annual cost base by at least £3 million. These included a number of redundancies and other positions which have been left unﬁlled as staff have left, and a renegotiation of certain costs with suppliers. These measures will help to ensure that income from asset management covers the operating expenses of the entire Group. The measures have also provided the opportunity to create operational synergies which will enhance the Group's future growth prospects by making available best in class operating skills to a broader client base
In June 2009, the Group agreed a waiver of the asset cover and gearing covenants in its original Core Facility Agreement with its principal lending bank to provide time to renegotiate the terms of the Original Core Facility Agreement. These waivers expire on 30 September 2009. However in August 2009, the Group subsequently reached agreement with its principal lending bank, conditional on the Capital Raising, for the amendment of the covenants in its Original Core Facility Agreement to give greater covenant headroom. Please see paragraph 5 ''Details of Agreements with Lending Banks'' below for further information.

In addition, actions have been taken in partnership with the relevant Fund manager to strengthen the financial position of the Funds. The objective in each case has been to address the short-term risk of a breach of an LTV covenant, whilst securing a long-term solution for each Fund which supports the Group's continuing role as property asset manager.

The Mall Fund

In June 2008, The Mall Fund raised £286 million of capital through an open offer. The proceeds were used to repay the RBS bank facility in full and as a consequence, the Fund has no effective LTV covenant on its remaining bond financing. The Company voted in favour of the open offer, but decided not to take up its entitlement
In July 2008, The Mall Fund sold three shopping centres for £286 million, representing a 6% net initial yield

Together, these transactions put The Mall Fund on a more secure ﬁnancial footing and hence helped to safeguard the Group's investment and future management income stream and its share of the Fund's income.

The Junction Fund

In March 2008, The Junction Fund completed the sale of Great Western Retail Park, Glasgow for £58.5 million, representing a 5.75% net initial yield
In August 2008, The Junction Fund completed the sale of the Templars Retail Park, Oxford for £57 million, representing a 5.7% net initial yield
In October 2008, The Junction Fund reached agreement with its lending banks to relax the 60% LTV covenant in its facility to 70% for a period of 12 months
In November 2008, The Junction Fund completed the sale of St George Retail Park, Leicester for £32 million, representing an 8.2% net initial yield
In May 2009, The Junction Fund raised £63.6 million of capital (including £50 million from AREA) through a placing and open offer. The Company voted in favour of this placing and open offer but only took up £600,000 of its entitlement. The proceeds were used primarily to repay part of the Fund's bank debt. At the same time, a refinancing package was agreed with the Fund's lending banks. Under the new package, the LTV covenant on the facility was further relaxed to 90% until 30 September 2010, after which it will fall in tiers to 65% after September 2012. In addition, the term ICR covenant has been set at 130% until 2012, after which it will increase further to 135%. Other changes to the facility include the margin payable, which is now linked to the level of LTV covenant, and the maturity date, which has been extended to the earlier of April 2014 or the termination of the Fund

X-Leisure Fund

In April 2009, the X-Leisure Fund sold the O2 Centre on Finchley Road in London for £92.5 million, representing a 7.8% net initial yield
In July 2009, the X-Leisure Fund raised £50 million of capital through an open offer. The open offer attracted broadly based subscriptions from 15 existing as well as one new investor. The Company voted in favour of this open offer and subscribed for £4 million in cash out of its pro rata entitlement of approximately £9.7 million (as a result of which its interest in now approximately 12%), which would have resulted in a deemed disposal of £5.0 million as at 30 June 2009, representing approximately 10% of NAV as at 30 June 2009. The proceeds were used primarily to repay part of the Fund's bank debt. The Fund's banking arrangements have been amended. The Fund has agreed with its syndicate of five banks to extend the life of the core banking facility to 31 March 2014 and to increase the loan to value covenant to 90% for the period to 31 December 2010, after which it falls in tiers to 65% from 1 July 2013. The interest cover ratio has been set at 130% until 31 March 2012 rising, in tiers to 150% from 1 April 2013. The syndicate of banks has also agreed, in principle, to finance the Brighton Marina asset (which has been financed through an asset securitisation (CMBS) which is due to mature in October 2009). The Fund has separately renegotiated its banking arrangements for each of the Castleford and Milton Keynes Xscape facilities the impact of which (through increased LTV covenants) is to increase its financial flexibility. The Castleford agreement has yet to be formally agreed
In June 2009, a ''partnership strategy resolution'' was approved by unit holders, under which a business plan for 2013 will be prepared that specifically encompasses exit options. This plan required approval by a ''partnership special resolution''. Additionally, the ''partnership strategy resolution'' agreed to bring forward the initial expiry date for the partnership to 31 December 2014 with the potential for extension on the recommendation of the Fund manager and a vote of unit holders to December 2021
Under the terms of a ''partnership governance resolution'' also approved by unit holders in June 2009, property and non-FSA regulated fund management activities have been integrated into a new joint venture, X-Leisure Limited, which is owned 50% by the Group and 50% by Hermes. Under the terms of the new fund and property management agreement, X-Leisure Limited has appointed as manager until the expiry of the Fund or until the fund and property management agreement is terminated, if earlier. X-Leisure Limited's prime objective is to provide a more efficient service to the Fund. Over time it is also expected to build on its leisure platform

Taken together, the Board believes that these actions have contributed significantly to strengthen the financial position of the Group. Although sentiment in both investment and tenant markets continued to deteriorate in the second quarter of 2009 and property markets continue to be highly volatile, there are some signs that sentiment has now started to improve. With The Junction Fund and the X-Leisure Fund now stabilised, the Board believes that now is the right time to issue equity at the Group level, and to lock in the new banking arrangements that have been agreed. This decision has been reinforced by the opportunity to develop a strategic relationship with Parkdev (see ''Relationship with Parkdev'' above) which not only intends to invest, together with the other Parkdev Investors, £23.5 million in the Parkdev Firm Placing but, in conjunction with its associates, also proposes to introduce opportunities where the Group can further leverage its property asset management capabilities. The Board believes that these actions, taken together with the Capital Raising and the Group's entry into its amended banking arrangements (as described in ''Details of Agreements with Lending Banks'' below), address the concerns raised by the Directors in the Group's annual report and accounts for the year ended 30 December 2008, which are incorporated by reference in the prospectus, about the material uncertainty around the continuing availability of satisfactory levels of bank and other funding to the Group, and which resulted in the Group's independent auditors noting an emphasis of matter in their report to the Shareholders.

Principal terms of Capital Raising

Capital & Regional is proposing to raise approximately £62.8 million (net of expenses) by way of the Capital Raising. 89.0 million Parkdev Firm Placed Shares will be issued through the Parkdev Firm Placing, 47.6 million Firm Placed Shares will be issued through the Firm Placing and 142.7 million Open Offer Shares will be issued through the Placing and Open Offer.

Principal terms of the Placing and Open Offer

Assuming that the market price of an Ordinary Share immediately after the Capital Reorganisation remains the same as the market price of an Existing Share immediately prior to the Capital Reorganisation, the Open Offer Issue Price of 24.0 pence per Open Offer Share represents a discount of 74.0 pence (75.5%) to the Closing Price of 98.0 pence per Ordinary Share on 19 August 2009 (being the last dealing day prior to announcement of the intention to do the Capital Raising).

2 Open Offer Shares for every 1 Existing Share

Fractions of Open Offer Shares will not be allotted to Qualifying Shareholders in the Open Offer and fractional entitlements under the Open Offer will be rounded down to the nearest whole number of Open Offer Shares, aggregated and placed ultimately for the benefit of the Company.

Qualifying Shareholders may apply for any whole number of Open Offer Shares up to their maximum entitlement which, in the case of Qualifying Non-CREST Shareholders, is equal to the number of Open Offer Entitlements as shown in Box 2 on their Application Form, or, in the case of Qualifying CREST Shareholders, is equal to the number of Open Offer Entitlements standing to the credit of their stock account in CREST. Qualifying CREST Shareholders will receive a credit to their appropriate stock accounts in CREST in respect of their Open Offer Entitlements at 8.00 a.m. on 21 August 2009. Qualifying Shareholders with holdings of Existing Shares in both certificated and uncertificated form will be treated as having separate holdings for the purpose of calculating their entitlements under the Open Offer, as will Qualifying Shareholders with holdings under different designations or in different accounts.

Application has been made for the Open Offer Entitlements to be admitted to CREST. It is expected that the Open Offer Entitlements will be admitted to CREST at 8.00 a.m. on 21 August 2009. The Open Offer Entitlements will also be enabled for settlement in CREST at 8.00 a.m. on 21 August 2009. Applications through the CREST system may only be made by the Qualifying Shareholder originally entitled or by a person entitled by virtue of a bona fide market claim.

Qualifying CREST Shareholders should note that, although the Open Offer Entitlements will be admitted to CREST and be enabled for settlement, applications in respect of entitlements under the Open Offer may only be made by the Qualifying Shareholder originally entitled or by a person entitled by virtue of a bona ﬁde market claim raised by Euroclear's Claims Processing Unit. Qualifying Non-CREST Shareholders should note that their Application Form is not a negotiable document and cannot be traded.

Further information on the Open Offer and terms and conditions on which it is made, including the procedure for application and payment, are set out in Part III (Terms and Conditions of the Open Offer) of the prospectus and, where relevant, on the applicable Application Form.

If Admission does not take place on or before 8.00 a.m. 10 September 2009 (or such later time and date as the Company, and the Joint Bookrunners may determine), the Open Offer will lapse, any Open Offer Entitlements admitted to CREST will thereafter be disabled and application monies under the Open Offer will be refunded to the applicants, by cheque (at the applicant's risk) in the case of Qualifying Non-CREST Shareholders and by way of a CREST payment in the case of Qualifying CREST Shareholders, without interest as soon as practicable thereafter. In these circumstances, the Placing to the Placees will not proceed.

The Placing and Open Offer is conditional, amongst other things, upon:

The passing, without material amendment, of the Resolutions at the General Meeting (and not except with the prior written agreement of the Joint Bookrunners, at any adjournment of such meeting);
Admission taking place by no later than 8.00 a.m. on 10 September 2009 (or such later time and date as the Company and the Joint Bookrunners may agree); and
The Sponsors' and Placing Agreement otherwise having become unconditional in all respects (save for the condition relating to Admission) and not having been terminated in accordance with its terms prior to Admission.

The Placing and Open Offer is fully underwritten by the Joint Underwriters pursuant to the Sponsors' and Placing Agreement. The principal terms of the Sponsors' and Placing Agreement are summarised in paragraph 17 of Part VIII (Additional Information) of the prospectus. The Joint Bookrunners have agreed under the Sponsor's Placing Agreement to procure as agent for the Company, acquirers for the New Ordinary Shares not taken up under the Placing and Open Offer or failing that, to acquire such New Ordinary Shares themselves.

Application has been made to the UKLA for the Open Offer Shares to be admitted to the Official List and to the London Stock Exchange for the Open Offer Shares to be admitted to trading on the London Stock Exchange's main market for listed securities. It is expected that Admission will become effective on 10 September 2009 and that dealings for normal settlement in the Open Offer Shares will commence at 8.00 a.m. on the same day.

Any Qualifying Shareholder who has sold or transferred all or part of his or her registered holding(s) of Ordinary Shares prior to the close of business on 20 August 2009 is advised to consult his or her stockbroker, bank or other agent through or to whom the sale or transfer was effected as soon as possible since the invitation to apply for Open Offer Shares under the Open Offer may be a benefit which may be claimed from him/her by the purchasers under the rules of the London Stock Exchange.

The Open Offer Shares, when issued and fully paid, will be identical to and rank in full with, the Ordinary Shares for all dividends or other distributions declared, made or paid after Admission and in all respects will rank pari passu with the Existing Shares. No temporary documents of title will be issued.

The commitments of the Placees are subject to clawback in respect of valid applications for Open Offer Shares by Qualifying Shareholders pursuant to the Open Offer.

Principal terms of the Parkdev Firm Placing

Capital & Regional is proposing to issue 89.0 million Parkdev Firm Placed Shares pursuant to the Firm Placing, and the Parkdev investors have agreed to acquire 89.0 Parkdev Firm Placed Shares. The Parkdev Firm Placing will not be underwritten and is conditional, inter alia, upon Admission.

The Parkdev Investors have made firm commitments in respect of an aggregate of £23.5 million of Parkdev Firm Placed Shares. The commitment of Parkdev International Asset Managers (Pty) Limited to make payment for £18.3 million of Parkdev Firm Placed Shares (representing 78% of the Parkdev Investors' aggregate investment) is guaranteed by Investec Private Bank and Investec Bank PLC. The commitment of Pinelake International Limited to make payment for £5.0 million of Parkdev Firm Placed Shares (representing 21% of the Parkdev Investors' aggregate investment) is guaranteed by Investec PLC. Clearance Capital (Cayman) Limited, in respect of its commitment to make payment for £160,000 of Parkdev Firm Placed Shares (representing less than 1% of the Parkdev Investors' aggregate investment), have irrevocably undertaken to deposit £160,000 in an escrow account. Pursuant to these arrangements, the acquisition funds of the Parkdev Investors will be released at Admission in accordance with their respective settlement instructions for the purpose of acquiring 606,060 Parkdev Firm Placed Shares in aggregate.

Assuming that the market price of a New Ordinary Share immediately after the Capital Reorganisation remains the same as the market price of an Existing Share immediately prior to the Capital Reorganisation, the Parkdev Firm Issue Price of 26.4 pence per Parkdev Firm Placed Share represents a discount of 71.6 pence (73.1%) to the Closing Price of 98.0 pence per Ordinary Share on 19 August 2009 (being the last dealing day prior to announcement of the intention to do the Capital Raising). The Parkdev Firm Placed Shares have been placed at a premium of 10.0% to the Open Offer Issue Price.

The Parkdev Firm Placed Shares are not subject to clawback and do not form part of the Open Offer. The Parkdev Firm Placing is expected to raise approximately £23.5 million, before expenses. The Parkdev Firm Placing is subject to the same conditions and termination rights that apply to the Placing and Open Offer.

Application will be made to the UK Listing Authority for the Parkdev Firm Placed Shares to be admitted to the Ofﬁcial List and to the London Stock Exchange for the Parkdev Firm Placed Shares to be admitted to trading on the London Stock Exchange's main market for listed securities.

The Parkdev Firm Placed Shares, when issued and fully paid, will be identical to, and rank in full with, the Ordinary Shares for all dividends or other distributions declared, made or paid after Admission and will rank pari passu in all respects with the Existing Shares as at the date of issue.

Principal terms of the Firm Placing

Capital & Regional is proposing to issue 47.6 million Firm Placed Shares pursuant to the Firm Placing.

Assuming that the market price of a New Ordinary Share immediately after the Capital Reorganisation remains the same as the market price of an Existing Share immediately prior to the Capital Reorganisation, the Firm Placing Issue Price of 24.0 pence per Firm Placed Share represents a discount of 74.0 pence (75.5%) to the Closing Price of 98.0 pence per Ordinary Share on 19 August 2009 (being the last dealing day prior to announcement of the intention to do the Capital Raising).

The Firm Placed Shares are not subject to clawback and do not form part of the Open Offer. The Firm Placing is expected to raise approximately £11.4 million, before expenses. The Firm Placing is subject to the same conditions and termination rights that apply to the Placing and Open Offer.

Application will be made to the UK Listing Authority for the Firm Placed Shares to be admitted to the Ofﬁcial List and to the London Stock Exchange for the Firm Placed Shares to be admitted to trading on the London Stock Exchange's main market for listed securities.

The Firm Placed Shares, when issued and fully paid, will be identical to, and rank in full with, the Ordinary Shares for all dividends or other distributions declared, made or paid after Admission and will rank pari passu in all respects with the Existing Shares as at the date of issue.

The Firm Placing is fully underwritten by the Joint Underwriters pursuant to the Sponsors' and Placing Agreement. The Joint Bookrunners have agreed under the Sponsors' and Placing Agreement to procure as agent for the Company, acquirers for the Firm Placed Shares or failing that, to acquire such Firm Placed Shares themselves.

Structure of the capital raising

The Capital Raising has been structured in a way that is expected to have the effect of facilitating the creation of distributable reserves approximately equal to the net proceeds of the Capital Raising less the nominal value of the New Ordinary Shares issued by the Company. The Company and Newco Subscriber have agreed to subscribe for ordinary shares in Capital & Regional Equity (Jersey) Limited, a company majority-owned by the Company. Newco Subscriber will pay monies that it receives from Placees, the Parkdev Firm Placees and the Firm Placees and the Receiving Agent will pay monies that it receives from Qualifying Shareholders in each case taking up New Ordinary Shares under the Capital Raising, to an account with the Receiving Agent, which net proceeds will be used to subscribe for redeemable preference shares in Capital & Regional Equity (Jersey) Limited.

The Company will allot and issue the New Ordinary Shares to those persons entitled thereto in consideration of Newco Subscriber transferring its holdings of ordinary shares and redeemable preference shares in Capital & Regional Equity (Jersey) Limited to the Company pursuant to clause 5 of the Subscription & Transfer Deed. Accordingly, instead of receiving cash as consideration for the issue of the New Ordinary Shares, at the conclusion of the Capital Raising the Company will own the entire issued share capital of Capital & Regional Equity (Jersey) Limited whose only asset will be its cash reserves, which will represent an amount equivalent to the net proceeds of the Capital Raising. The Company will be able to utilise this amount by redeeming the redeemable preference shares it holds in Capital & Regional Equity (Jersey) Limited and, during any interim period prior to redemption, by procuring that Capital & Regional Equity (Jersey) Limited lends the amount to the Company.

In order to maximise the level of distributable reserves arising from the Capital Raising and to provide the Company with ﬂexibility in relation to its capital structure in the future, the Capital Raising is conditional on, amongst other things, the completion of the Capital Reorganisation, which will result in the nominal value of each Ordinary Share being reduced from 10 pence to one penny.

The creation of distributable reserves will help to facilitate the payment of dividends to Shareholders in future when the Board so determines. For a description of the Open Offer structure, see Part III (Terms and Conditions of the Open Offer) of the prospectus..

The Board is committed to resuming dividend payments when it is prudent to do so but the future payment of dividends will be linked for the foreseeable future to the Company's cash generating capability, and will be restricted to not more than 50% of operating cash flow less interest and tax to comply with the conditions of the Group's Conditional Amended Facility Agreements, with any final dividend being subject to the approval of Shareholders at a general meeting.

The Capital Reorganisation, the Parkdev Firm Placing, the Firm Placing and the Placing and Open Offer are inter-conditional and conditional, amongst other things, on Shareholder approval, which will be sought at the General Meeting convened for 7 September 2009.

Details of agreements with lending banks

The Conditional Amended Facility Agreements are conditional upon the Capital Raising proceeding and at least £40 million (after expenses) being raised.

The terms of the Amended Core Facility Agreement provide, inter alia, that:

The amount of the facility is £58 million and the interest rate is set at 3.5% per annum over LIBOR until receipt by the bank of the ﬁnancial statements for the period ending 31 December 2010 and thereafter linked to the asset cover covenant test (if asset cover test is over 200%, then 3.5% per annum, if over 400%, then 3.25% and if over 500%, then 3% subject to no event of default being continuing);
The gearing covenant is set at 200%, to be tested based on the Group's financial statements as at 30 June and 30 December each year;
The gross asset cover covenant is set at 200%, to be tested quarterly;
The ICR covenant is set at 150%, to be tested based on the Group's ﬁnancial statements as at 30 June and 30 December each year;
Security is granted including a corporate guarantee, cross guarantees and charges over certain Group investments and Group holdings in the Funds and joint ventures; and
the arrangement fee is £1.3 million (2.5% of the credit facility limit).
The terms of the Amended GNW Facility Agreement provide, inter alia, that:
The amount of the facility is £65,487,500 and the interest rate set at 2% per annum over LIBOR;
The ICR covenant is set at 135%, to be tested quarterly based on the Group's quarterly management accounts and annual financial statements;
The LTV covenant is set at 100% until 30 December 2012, when it is reduced to 90% and further reduced to 80% on 30 June 2013, to be tested annually against a valuation report;
Security is granted including Charges over Group property, a debenture and a cross guarantee; and the arrangement fee is £1,309,750 (2% of the new facility amount)

The Group has also entered into the Amended Hemel Facility Agreement with one of its other lending banks, which is not conditional on the Capital Raising proceeding. The Amended Hemel Facility Agreement has been entered into to amend the existing credit facility in respect of the Group's wholly-owned leisure park, Leisure World, Hemel Hempstead, which is due to be refinanced in September 2009, and to extend the original loan repayment date to 5 September 2012.

The terms of the Amended Hemel Facility Agreement provide, inter alia, that:

The amount of the facility is £9 million and the interest rate set at 3% per annum over LIBOR falling to 2.75% per annum over LIBOR after three months then 2.5% per annum over LIBOR after 12 months from the new facility;
The ICR covenant is set at 150%, to be tested on each interest payment date, the date of any prepayment and the date of any surrender of the NLOL lease;
The LTV covenant is not tested for the first 18 months following the amendment and is thereafter set at 75% for the following year and thereafter set at 70%, to be tested annually against a valuation report;
A £1 million paydown of the loan is required within three months of the date of the new facility, with a further repayment of £500,000 after each of 12, 18 and 24 months;
Security is granted over Group property and a parent company guarantee has been given; and
The arrangement fee is £75,000 (0.625% of the original facility amount) with a back end fee payable upon payment of the loan in full of £75,000

The Board believes that the Conditional Amended Facility Agreements, together with the Amended Hemel Facility Agreement, will give the Group greater covenant headroom across its principal credit facilities and will help to ensure that the Group is able to comply on an ongoing basis with its banking covenants despite the expected further declines in valuations of the Group's properties (and those of the Funds and joint ventures in which it has investments). If the Capital Raising does not proceed, absent an extension to such waivers or a successful renegotiation of the current banking covenants in the Original Core Facility Agreement, the Original GNW Facility Agreement and the Original LGP Facility Agreement, they will continue to apply and it is likely that, given the continued decline in UK property valuations, the Group would be in breach of one or more of these covenants immediately following 30 September 2009. The Original LGP Facility Agreement matures on 19 October 2009 and would need to be reﬁnanced.

Definitions:

Admission

the admission of the New Ordinary Shares to the Official List becoming effective in accordance with the Listing Rules and the admission of such shares to trading on the London Stock Exchange's main market for listed securities becoming effective in accordance with the Admission and Disclosure Standards

Amended Core Facility Agreement

the amended core facility agreement dated 20 August 2009 between Capital & Regional Holdings Limited Holdings and Bank of Scotland PLC

Amended GNW Facility Agreement

the amended GNW facility agreement dated 20 August 2009 between Morrison Merlin Limited and Bank of Scotland PLC

Amended Hemel Facility Agreement

the facility agreement dated 20 August between Capital & Regional Hemel Hempstead (Jersey) Limited and the Company amongst others and Eurohypo AG, London Branch relating to the Group's wholly-owned property, Leisure World, Jarman Fields, Hemel Hempstead

Amended LGP Facility Agreement

the amended Lower Grosvenor Place facility agreement dated 20 August 2009 between Bank of Scotland plc and Capital & Regional plc

Application Form

the application form on which Qualifying Non-CREST Shareholders (other than Qualifying Non-CREST Shareholders with, subject to certain exceptions, a registered address in the United States or any Restricted Territories) who are registered on the register of members of the Company may apply for Open Offer Shares under the Open Offer

Board

the board of directors of the Company

Capital Raising

the Parkdev Firm Placing, the Firm Placing and the Placing and Open Offer

Capital Reorganisation

the proposed reorganisation of the Ordinary Shares

Closing Price

The closing middle-market quotation of an Ordinary Share as derived from the Daily Official List on a particular day

Company or Capital & Regional

as the context requires, (i) Capital & Regional Plc, a company incorporated under the laws of England and Wales with registered number 1399411 and its registered office at 10 Lower Grosvenor Place, London SW1W 0EN (ii) Capital & Regional PLC and its subsidiary, joint venture and associated companies from time to time

Conditional Amended Facility Agreements

the Amended Core Facility Agreement, the Amended GNW Facility Agreement and the Amended LGP Facility Agreement

Directors

the executive directors and non-executive directors of the Company

Ex-entitlement Date

20 August 2009

Existing Shares

the ordinary shares of 10 pence each in the capital of the Company and "Existing Share" means any one of them

Firm Placed Shares

the one penny Ordinary Shares which the Joint Bookrunners have made arrangements to place firm conditionally on a non-pre-emptive basis with the Firm Placees, conditional upon the Capital Reorganisation becoming effective, and "Firm Placed Share" means any one of them

Firm Placees

investors to which Firm Placed Shares are to be placed

Firm Placing

the firm placing to the Firm Placees of the Firm Placed Shares

Funds

The Mall Fund, The Junction Fund and the X-Leisure Fund, and "Fund" means any one of them

General Meeting

The general meeting of Capital & Regional to be held at 11.00 a.m. on 7 September 2009

Hermes

Hermes Investment Management Limited

ICR

interest cover ratio

Initial yield

the annualised net rents generated by the portfolio expressed as a percentage of the portfolio valuation, excluding development properties

Joint Bookrunners

Credit Suisse and J.P. Morgan Cazenove

London Stock Exchange

London Stock Exchange plc

New Ordinary Shares

the Parkdev Firm Placed Shares, and/or the Firm Placed Shares and/or the Open Offer Shares, as the context requires

Non-CREST Shareholder

a Shareholder who does not hold their Ordinary Shares in CREST

Official List

the Official List of the FSA pursuant to Part VI of the FSMA

Open Offer

the invitation by the Company to Qualifying Shareholders to apply for Open Offer Shares, on the term and conditions set out in this document, and in the case of Qualifying Non-CREST shareholders, in the Application Form

Open Offer Entitlement

the entitlement of a Qualifying Shareholder to apply for 2 Open Offer Shares for every 1 Existing Shares held on the Record Date

Open Offer Issue Price

24 pence for each Open Offer Share

Open Offer Shares

the one penny Ordinary Shares being offered to Qualifying Shareholders pursuant to the Open Offer, conditional upon the Capital Reorganisation becoming effective, and "Open Offer Share" means any one of them

Ordinary Shares or Shares

the Existing Shares or, following the Capital Reorganisation becoming effective, the one penny Ordinary Shares, as the context requires, and "Ordinary Share" means one of them

Original GNW Facility Agreement

the facility agreement dated 4 October 2005 between Morrison Merlin Limited and Bank of Scotland PLC

Original LGP Facility Agreement

the facility agreement dated 19 October 1999 between the Company and Bank of Scotland PLC

Placees

the persons with whom a conditional placing of New Ordinary Shares (subject, where applicable, to the entitlements of Shareholders under the Open Offer) has been or will be made

Placing

the conditional placing of the Open Offer Shares with institutional investors at the Open Offer Issue Price subject to clawback in respect of valid applications made by Qualifying Shareholders under the Open Offer

Qualifying CREST Shareholders

Qualifying Shareholders holding Ordinary Shares in uncertificated form in CREST

Shareholder

a holder of Ordinary Shares or New Ordinary Shares (as the context requires)

This information is provided by RNS

The company news service from the London Stock Exchange

END

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