Freestone executive director Michael Aitken said the commercial mortgage-backed securitisation funding structure (CMBS) had been engineered by Rand Merchant Bank (RMB).

Aitken said Freestone was hoping to issue bond notes of about R500m on the Bond Exchange of SA next month. These would be secured by property worth about R900m.

Freestone was also creating a special purpose vehicle to hold the properties against which the notes would be issued. Freestone’s property portfolio is worth just under R1,4bn.

The company said the capital raised would finance the “lion’s share of Freestone’s borrowings, which amounted to R630m at December 2005”.

“We think the CMBS structure is going to gain popularity in SA both from the point of view of property companies wanting to raise a cheaper form of finance and also for CMBS investors for whom it is a diversifier,” said Aitken.

Indications were there was strong demand for bond notes.

RMB securitisation specialist Damian Botoulas said that the bond notes, which mature in 2011, were “an attractive investment opportunity for institutional investors ”.