Re: Refinancing

Land Securities Group Plc
27 September 2004

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART IN OR INTO THE
UNITED STATES





27 September 2004

Embargoed until 07.00am





LAND SECURITIES GROUP PLC ('Land Securities' / 'Group')



LAND SECURITIES REFINANCES DEBT



Land Securities Group PLC today announces its intention to refinance the Group's
mortgage debentures and unsecured bonds (together the 'Notes'), which have a
nominal value of approximately £1.8bn, through the establishment of a new
funding structure.  At the same time it will refinance all of its unsecured bank
debt with a new facility within this structure.



The key benefits of the proposal are:



•  Business flexibility through a structure which will allow for the
   active management of the Group's operations including the buying, selling and
   redevelopment of assets;



•  Financial flexibility with access to a range of debt instruments in a
   new secured structure, while retaining the ability to arrange bespoke funding
   outside this structure;



•  Efficient use of the inherent credit strength of the Group's
   investment portfolio, with improved credit ratings and reduced future funding
   costs;



•  A stable long term debt financing structure with a uniform set of
   operational and financial covenants;



•  Secured financing for all holders of Notes (the 'Current Noteholders')
   under a single security package, with improved and potentially less volatile
   credit ratings.



Under the proposals, Land Securities will invite Current Noteholders to exchange
their existing debt for up to circa £2.4bn of new bonds to be issued by Land
Securities Capital Markets PLC.  This exchange offer does not trigger the early
redemption payment provisions which exist under the terms of some of the
existing Notes.



The new bonds will be secured against an asset pool which, at the time of the
proposed exchange, is expected to include approximately £6.2bn of the Group's
total investment portfolio.  All of the Group's unsecured bank debt will be
refinanced at the same time and Land Securities has entered into an agreement
with Barclays, Citigroup and Lloyds Bank to underwrite a secured five-year
£1.5bn bank facility as part of the new structure.



The new bonds to be issued will have a higher total nominal value but a lower
interest rate than the Notes they replace, reflecting current market pricing.
As a result, the Group's annual interest charge will reduce by approximately
£25m.  The Group will incur an exceptional accounting charge against pre-tax
profits in the year to 31 March 2005, primarily reflecting the increase in the
nominal value of the Group's debt.  If the transaction had concluded on 22
September 2004 this charge would have been circa £659m and the Group's weighted
average cost of debt would have reduced to 5.6% from 7.6%.  The actual charge
and the actual average cost of debt will be determined by interest rates near
transaction closure.



Some £3.0bn of Land Securities' properties will remain outside the new funding
structure.  These assets mainly comprise the balance of Land Securities'
investment properties, its joint venture investments and Land Securities
Trillium properties.



A Special Committee of the Association of British Insurers ('ABI'), representing
approximately 37% by nominal value of outstanding Notes, has considered the
proposals.  The members of the Special Committee have informed Land Securities
that they find the proposals acceptable, that they intend to support the
proposals in respect of their own holdings and that they will be advising other
ABI members to consider a similar course of action.



The proposals will be voted on by Current Noteholders at meetings to be convened
during October.



Francis Salway, Group Chief Executive commented:



'These proposals are designed to improve the way in which we finance our
business. Through this structure, which takes full advantage of the security
afforded by our high-quality investment portfolio, we will refinance our
historical higher coupon debt in an efficient manner, lower our future borrowing
costs and, most importantly, provide improved flexibility in our financing which
should benefit all aspects of the business.  This will be achieved while
simultaneously providing debt investors with higher-rated secured paper.'



Summary of structure

Land Securities Group PLC today announces its intention to refinance the Group's
mortgage debentures and unsecured bonds (together the 'Notes'), which have a
nominal value of approximately £1.8bn, through the establishment of a new
funding structure.  At the same time it will refinance all of its unsecured bank
debt with new facilities within this structure.



The structure includes the establishment of a security group which will own
approximately £6.2bn of the Group's property assets.  Land Securities intends to
refinance the Notes and its existing unsecured bank debt with new secured bonds
and a new five year £1.5bn committed bank facility.  The new bonds and bank debt
will be secured over the assets in the security group.



Around £3.0bn of assets, including other investment properties, joint venture
investments and Land Securities Trillium properties will stay outside the
security group.  The existing secured loan to Land Securities Trillium of circa
£278m will remain outside the security group and will not be refinanced.



The Group has held extensive discussions with Standard and Poor's and Fitch
which have indicated preliminary ratings of AA for the new bonds.



Operational impact on Land Securities

The structure is designed to impose no material restrictions on the way the
business is currently managed, provided that the Group does not fall outside
certain limits set under a tiered covenant structure.  These limits include the
security group loan to value ('LTV') remaining at or below 65% and interest
cover remaining at or above 1.45 times.  If the security group LTV was to rise
above 65% or interest cover was to fall below 1.45 times, additional
restrictions would come into effect.  Properties and companies may be sold
subject to certain conditions and limits and the structure is not expected to
form an impediment to the conversion to a Real Estate Investment Trust, if
appropriate.



Funding of assets outside the structure, including Land Securities Trillium and
joint ventures, will be unaffected.  The ability of Land Securities to choose
whether to fund assets inside or outside the structure will give it additional
financing flexibility.



Financial Impact

The proposals to holders of Notes ('Current Noteholders'), if accepted, will
result in the Group incurring an exceptional charge before tax, primarily as a
result of the increase in the nominal amount of its debt.  The implementation of
the structure will not trigger early redemption payments under the terms of the
Notes.



Set out below is a table illustrating the effect of this transaction on the
Group, showing separately non-recurring items which will affect the profit and
loss account for the year to 31 March 2005 only and recurring items which will
affect the current and future financial years.  The profit and loss account for
the year to 31 March 2004 is set out for comparison only.  These figures are
illustrative based on the following assumptions:



•  the proposal closed on Wednesday 22 September 2004;

•  all Noteholders qualify for the early submission payment;

•  all Noteholders accept the offer and convert into the new structure;
   and

•  IBOXX prices being used to estimate the value of the repurchase
   premium.



The actual numbers will be subject to the transaction concluding, changes in
pricing of swaps and reference gilts, the amount of early submission payments
and of cash paid to non-eligible holders.


                                                                      Effect of proposed structure
£m                                                      Year to            Full year           Non
                                                       31/03/04      Recurring(1)(2)     recurring
Profit before interest, tax &
     exceptional costs                                    629.7                  (1)             -
Exceptional costs                                             -                    -          (14)
Profit before interest and tax                            629.7                  (1)          (14)
Net interest                                            (256.6)                   25             -
Exceptional interest                                          -                    -         (645)
Pre-tax profit                                            373.1                   24         (659)
Taxation                                                 (84.8)                  (7)           198
Profit after tax                                          288.3                   17         (461)
Dividends                                               (173.2)                    -             -
Retained profit                                           115.1                   17         (461)
Revenue profit                                            309.2                   24             -
Adjusted earnings per share (based on                    47.86p  up to 3.65p(2)(3)               -
revenue profit after tax)





(1)     Assumes full year impact of new structure

(2)     The transaction will reduce the Group's average cost of debt and the
        amount of interest capitalised on development expenditure will therefore 
        fall. This effect is not included in the figures above

(3)     Based on shares in issue as at 31 March 2004



The impact of non-recurring costs is to reduce NAV by 99p and to reduce NNNAV by
7p.



Common Terms Agreement ('CTA')

A CTA provides a security structure available to all secured financial creditors
of the security group, which will apply to future debt funding as well as to the
existing creditors of the security group.  The agreement includes a tiered
operational covenant structure enabling greater business flexibility when
leverage of the security group is below 65% LTV and interest cover is above 1.45
times, but provides increasing creditor protection as leverage increases:


                                    Tier 1                   Tier 2                    Tier 3
Covenants                                               Tighter disposal
                                                     constraints progressive
                                                      liquidity requirement
                                                           introduced
                             Business operations                              Substantial operating and
                           substantially unaffected                            financial restrictions
Leverage spectrum                    Low                     Medium                     High
Target LTV(1)                       <=55%                     <=65%                     >65%
Target ICR                         >=1.85x                   >=1.45x                   <1.45x
Testing                         Semi-annually             Semi-annually               Quarterly



(1)     Tier 1 threshold is reduced from 55% to 50% and Tier 2 threshold is
        reduced from 65% to 60% in the event of a change of control unless the 
        ratings test is satisfied



Proposals to Bondholders

Land Securities proposes to redeem or repurchase all existing Notes for the
applicable repurchase price and, if relevant, an early submission payment in
cash.  All Current Noteholders who satisfy certain eligibility requirements will
receive new bonds issued under the new structure with a principal amount equal
to the applicable repurchase price for the redemption / repurchase of the Notes.




Land Securities may pay up to an aggregate of £150m to redeem or repurchase
Notes held by non-eligible Noteholders and to meet the early submission payments
and certain other cash payments under the proposals.  Details of the proposals
are set out in the Prospectus, Offer and Consent Solicitation Document to be
published today.



The terms of the proposals are summarised in the table below:


                                                                                   Illustrative  Illustrative
                                                                                       proforma      proforma
                                                    Early       Repur-        New           new           new
  Security     Security               Pricing     submis-        chase      issue       debt(2)       debt(2)
   Nominal      Coupon              reference   sion %(1)       spread     spread       nominal        coupon
Existing Unsecured bonds                                               New Secured Bonds
     £200m       9.5%   2007    4.5's of 2007      0.500%      +51 bps    +50 bps         £219m        5.239%
     £400m     5.875%   2013      5's of 2014      1.000%      +76 bps    +60 bps         £406m        5.426%
     £200m       9.0%   2020      8's of 2021      1.500%     +103 bps    +75 bps         £265m        5.517%
     £200m     6.375%   2024      5's of 2025      1.625%     +105 bps    +77 bps         £212m        5.466%
Existing Secured bonds
     £400m      10.0%   2025      5's of 2025      2.000%      +84 bps    +77 bps         £617m        5.466%
     £200m      10.0%   2027      6's of 2028      2.150%      +86 bps    +79 bps         £316m        5.438%
     £200m      10.0%   2030      6's of 2028      2.300%      +88 bps    +81 bps         £322m        5.458%
   £1.80bn   8.51%(3)                                                                   £2.36bn      5.44%(3)



(1)  Early submission percentage calculated by reference to nominal value of
     existing securities

(2)  As at 22 September 2004

(3)  Average cost of debt weighted by nominal only



Agreement has also been reached to redeem £37.7m nominal of private debentures.



The early submission payment will be paid to bondholders and debenture holders
who accept the Group's proposals within 14 and 21 days respectively.



The estimated value of the offer to Noteholders and the Group is illustrated
below based on market prices at the close of business on 22 September 2004.
These figures are illustrative only as the actual numbers will be subject to the
transaction concluding, changes in bond pricing and level of early submission
payments


Bond and debenture holders(1)                                                                        £m
Repurchase price - premium over IBOXX                                                                 4
Value of early submission payment, if all accept                                                     28
                                                                                                     32
Group (all figures post tax(2))
Cost of early submission payment, if all accept                                                    (20)
Net present value of initial fees and future running costs                                         (37)
Net present value benefit of changed timing of financing
   costs (and related tax relief)(3)                                                                114
                                                                                                     57



(1)       Listed bonds and debentures, assuming no tax payable by holders

(2)       Assuming current tax rates over life of bonds

(3)       Discount rate - post-tax weighted average cost of capital of 5.3%
          (7.5% pre-tax)



There are a number of benefits for Current Noteholders who accept the offer
including:



•         Security over current mark to market;

•         More highly rated paper

•         Security over broad asset pool;

•         Improved and stabilised rating;

•         Expected improved liquidity;

•         Improved covenants;

•         Inter-creditor stability; and

•         Non-restricted Group funding will not impact secured group.





The benefits for Land Securities are:



•         Enhanced financial and operational flexibility;

•         Credit strength of high quality investment portfolio optimised;

•         Lower future funding costs;

•         Improved and stabilised rating;

•         Common covenants package; and

•         Non restricted Group funding will not impact secured group.



A Special Committee of the ABI representing approximately 37% in nominal value
of outstanding Notes has considered the proposals.  The members of the Special
Committee have informed Land Securities that they find the proposals acceptable,
that they intend to vote in favour of the Extraordinary Resolutions in respect
of their own holdings and that they will be advising other ABI members to
consider a similar course of action.



The Special Committee has advised Land Securities that this recommendation
relates only to the current proposals and not to further offers which Land
Securities may make and that the overall scope of the proposals indicates the
need for each Existing Noteholder to undertake its own detailed assessment of
the new arrangements.



Each of the proposals is inter-conditional on all of the other series of Notes
approving the proposals which apply to them.  However, this inter-conditionality
is waivable at Land Securities' discretion.



The early submission payment date is 12 October 2004 for holders of bearer bonds
and 19 October 2004 for holders of debenture stock.  The first closing date for
acceptances under the exchange offer is 28 October 2004, although any
adjournment of Current Noteholder meetings may extend the process.  Assuming the
proposals are approved, exchange of Notes and creation of the new structure is
expected to occur during early November.



                                    - ENDS -



Contacts


Land Securities                                      Financial Dynamics
[phone]                                     [phone]



Francis Salway                                       Stephanie Highett/
Group Chief Executive                                Jonathon Brill



Andrew Macfarlane
Group Finance Director



Emma Denne
Director of Corporate Communication



Bondholder Contact:

Sole Dealer Manager
Citigroup Global Markets Limited
James Brent
020 7986 6980



Liability Management Desk
Greg Makoff
[e-mail]
020 7986 8969



Important Notice



A Prospectus, Offer and Consent Solicitation Document, which comprises a
prospectus for the purposes of the Public Offers of Securities Regulations 1995,
will be published today and is obtainable from Citigroup Global Markets Limited
('Citigroup') at Canada Square, Canary Wharf, London E14 5LB.



No offer or invitation to acquire or exchange any securities or proposals to
noteholders is being made pursuant to this press release.  Any such offer,
invitation or proposals are only being made in the Prospectus, Offer and Consent
Solicitation Document and any such acquisition or exchange or acceptance of such
proposals should be made solely on the basis of information contained in that
document.



For the purpose of Section 21 of the Financial Services and Markets Act 2000 ('
FSMA'), any invitation or inducement to engage in any investment activity
included within this press release is being made only to and is directed only at
(i) persons who are investment professionals within the meaning of Article 19
(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order
2001 (as amended) (the 'Financial Promotion Order'); (ii) persons who fall
within Articles 49 (2) (a)  to (d) ('high net worth companies, unincorporated
associations etc.') of the Financial Promotion Order; (iii) persons who fall
within Articles 42 and 43 of the Financial Promotion Order; and (iv) any other
persons to whom this presentation for the purposes of Section 21 of FSMA can
otherwise lawfully be communicated (all such persons together being referred to
as 'relevant persons'). It must not be acted on or relied upon by persons other
than relevant persons.  Any invitation or inducement to engage in any investment
activity included within this press release is available only to relevant
persons and will be engaged in only with relevant persons.



Citigroup is acting exclusively for Land Securities and for no one else in
connection with the transactions described in this press release and will not be
responsible to anyone other than Land Securities for providing the protections
afforded to its customers or for giving advice in relation to the transactions.



This press release is not an offer of securities for sale in the United States.
The new bonds to be issued under the new structure have not been and will not be
registered under the United States Securities Act of 1933, as amended (the '
Securities Act') and may not be offered or sold within the United States or to
or for the account or benefit of U.S. Persons (as defined in Regulation S under
the Securities Act ('Regulation S')), except pursuant to an exemption from, or
in a transaction not subject to, the registration requirements of the Securities
Act.  Accordingly, the new bonds will be offered and sold only (A) to Qualified
Institutional Buyers in reliance on the exemption from the registration
requirements of the Securities Act provided by Rule 144A under the Securities
Act and (B) outside the United States to non-US Persons in compliance with
Regulation S.



Notes to Editors



The sole dealer manager for the offer is Citigroup Global Markets Limited.






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