Nord Anglia, the UK’s largest private day nursery group, has agreed a £12.5m sale and leaseback deal with the Pine Fund for seven of its settings.

The deal, which was completed at the end of June, saw Pine buy two freehold and five leasehold properties in a 25-year deal that allows Nord Anglia will continue to operate the nursery businesses at these properties. The seven nurseries, which operate under the Leapfrog brand, are in Chandlers Ford, Hampshire; Thurrock, Essex; Enfield and Mill Hill in north London; York; Bicester, Oxfordshire and Emersons Green near Bristol, Avon.

Nord Anglia said the proceeds of the transaction would be used primarily to pay down bank debt of £10m, approximately six months earlier than originally scheduled and that the balance of the net proceeds would be used “for general corporate purposes”. The company added that the commercial terms of the leases were in line with current market rates and that the book value of the properties being sold was £12.8m.

Alan Proto, managing partner of Nexus Pine LLP, said, “Nord Anglia’s decision to enter into this transaction with Pine reflects a recognition in the marketplace that Pine has something special to offer the sector in terms of financing. In concluding this transaction Pine was able to move extremely quickly, with exchange of contracts achieved in under a month from the original discussions with Nord Anglia.”

Nord Anglia chief executive Andrew Fitzmaurice said, “We looked long and hard at the best way to meet the group’s debt repayment obligations. I am pleased that we have found a deal which achieves this without diluting the group’s opportunities going forward.

“The management team is excited by the scale of the opportunities open to the group and will continue to focus on the task of delivering strong profit growth.”

The sale of the seven day nurseries came four weeks after the publication of Nord Anglia’s interim results for the six months to 28 February 2006 which showed that its nursery division was still underperforming. The company’s 98 nurseries in England and Wales offering more than 9,000 places had generated a turnover of £23.4m and had an operating profit of £100,000, compared to a £25.8m turnover and an operating profit of £1.8m during the same six-month period in 2005.

In a statement Nord Anglia admitted that the first half financial performance was “disappointing, with occupancy remaining largely flat” and that the underlying financial results “were suffering as a result of the price promotion that was implemented during 2004-05”. The company also pointed to difficulties in the UK nursery market generally “as competition has increased and demand growth has not kept pace with the increase in supply”.

During the first half of 2006 Nord Anglia sold a day nursery in Keighley and two surplus properties for £1.1m. Since 28 February the company has also sold a further two nurseries and its office buildings in Cheadle and Burton, raising a further £4.1m which has been used to pay down debt.

The Pine Fund is a Jersey-based unit trust that was launched in 2005 to offer day nursery operators competitive sale and leaseback funding. It concentrates on purchasing mature freeholds and portfolios of day nurseries with a minimum of 45 registered places from operators anywhere in the UK. Once purchased the Fund immediately rents the day nurseries back to the operator on a long lease.

The Pine Fund’s principal investors are funds managed by Electra Partners Limited and Nexus Structured Finance Limited. Its UK property manager is Nexus Pine LLP, whose partners are Alan Proto and Harry Hyman.

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