REG - Canary Wharf Fin II - Half-year Report

Lloyds BankingAnnouncement

23/09/2021 19:10

RNS Number : 8267M
  
Canary Wharf Finance II PLC
  
23 September 2021
  
 

 
CANARY WHARF FINANCE II PLC
23 SEPTEMBER 2021
 
PUBLICATION OF THE HALF YEARLY FINANCIAL REPORT FOR THE 6 MONTHS ENDED 30 JUNE 2021
 
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 2021, 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 23 September 2021, 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 2021 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: 23 September 2021 
 
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 2021 and contains information that covers the period from 1 January 2021 to 23 September 2021, the date of publication of this interim management statement.
 
BUSINESS REVIEW
 
The company is a subsidiary of Canary Wharf Group 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 and its subsidiaries ('the Group').  All activities take place within the United Kingdom.
 
At 30 June 2021, the company had £1,399,524,721 (31 December 2020 - £1,414,187,321) 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 £4,929,325 (period ended 30 June 2020 - loss of £4,940,024).
 
This loss included hedge reserve recycling recognised in the Income Statement of £4,987,552 (period ended 30 June 2020 - loss of £4,969,727 including fair value adjustments).  Including the hedge reserve recycling recognised in other comprehensive income the profit for the period was £58,227 (period ended 30 June 2020 - £29,703).
 
The balance sheet shows the company's financial position at the period end and indicates that net assets were £5,526,752 (31 December 2020 - £5,468,525).
 
The weighted average maturity of the company's securitised debt is 11.2 years (31 December 2020 - 11.6 years).  The weighted average interest rate of the securitised debt is 6.1% (31 December 2020 - 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 2021.
 
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 ongoing impact of COVID-19, the cyclical nature of the property market, concentration risk and financing risk.
 
COVID-19
 
Since early 2020, the UK economy has been significantly impacted by the COVID-19 virus which has caused widespread disruption and economic uncertainty.  The return to lockdown in January 2021 and the extension to the end of lockdown restrictions in July 2021 has continued this uncertainty but the positive news around rollout of vaccines and the recent opening up of the economy has improved the outlook.  
 
While the pandemic has had minimal impact on office rental income where approximately 99.0% of invoiced rent has been collected, retail rental income was 37.9% lower than the equivalent period in 2019 after adjusting for the impact of granting short term concessions to retail tenants to support them through the lockdowns.  
 
The valuation of the charged properties has been resilient notwithstanding the pandemic.
While there remains a risk of future falls in valuation, it is not anticipated that this will lead to covenant breaches of the securitisation secured against its office properties as the rental income stream from these properties is predominantly secured against tenants with strong covenants.  
 
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 2008/2009 financial crisis, uncertainty in the Eurozone and the implications of the UK's withdrawal from the EU. The full impact of the coronavirus is not yet possible to predict. Any long-term continuation of the pandemic will however inevitably affect short and medium term economic performance and confidence, with adverse implications for the property market. 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 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 50.0% 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.  No derivatives are entered into for speculative purposes.
 
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 30 June 2021 valuations of the properties upon which the company's notes are secured, the LMCTV ratio at the interest payment date in July 2021 was 43.7%.  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 (appointed 7 June 2021),

Sir George Iacobescu CBE, Shoaib Z Khan, Katy J Kingston (appointed as an alternate director to Shoaib Z Khan 28 April 2021), Russell J J Lyons (resigned as an alternate director to Shoaib Z Khan 28 April 2021), Justin Turner, Zachary B Vaughan (resigned 7 June 2021) and Rebecca J Worthington (appointed 28 April 2021), 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 2021
 




Audited 


 


Unaudited 


Unaudited 




year ended 


6 months 


6 months 




31 December 


ended 


ended 




2020 


30 June 2021 


30 June 2020 





£ 



Note



£ 




£ 






(14,007)



Administrative expenses



(11,460)




(8,952)





(14,007)


OPERATING LOSS


(11,460)


(8,952)




84,994,689 


Interest receivable


2


41,610,913 


42,579,800 





(94,857,959)



Interest payable


3



(46,528,778)




(47,510,872)





(9,877,277)


LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION


(4,929,325)


(4,940,024)





- 



Tax on loss on ordinary activities


4



- 




- 






(9,877,277)



LOSS ON ORDINARY ACTIVITIES AFTER TAXATION FOR THE PERIOD/YEAR



(4,929,325)




(4,940,024) 




 
 
 
 
 
 



 
OTHER COMPREHENSIVE INCOME
 




9,948,337 


Hedge reserve recycling


4,987,552 


4,969,727 





9,948,337 



OTHER COMPREHENSIVE INCOME FOR THE PERIOD/YEAR



4,987,552 




4,969,727 






71,060 



TOTAL COMPREHENSIVE INCOME FOR THE PERIOD/YEAR



58,227 




29,703 





 
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 2021 was approved by the Board of Directors on 23 September 2021. 
 
STATEMENT OF FINANCIAL POSITION
as at 30 June 2021
 




Audited 


 


Unaudited 


Unaudited 




31 December 


30 June 


30 June 




2020 


2021 


2020 





£ 



Note



£ 




£ 





 


CURRENT ASSETS




Debtors:


5


 




1,677,350,801 


Amounts falling due after one year


1,615,808,366 


1,684,673,289 




49,463,641 


Amounts falling due within one year


50,429,644 


47,858,386 





3,601,415 



Cash at bank



3,671,989 




3,548,081 





1,730,415,857 


 


1,669,909,999 


1,736,079,756 





(47,596,531)



Creditors: 
Amounts falling due within one year


6



(48,574,881)




(45,979,299)






1,682,819,326 



NET CURRENT ASSETS



1,621,335,118 




1,690,100,457 





1,682,819,326 


 
TOTAL ASSETS LESS CURRENT 
LIABILITIES


1,621,335,118 


1,690,100,457 





(1,677,350,801)



Creditors: 
Amounts falling due after more than one year


7



(1,615,808,366)




(1,684,673,289)






5,468,525 



NET ASSETS



5,526,752 




5,427,168 





 


 
CAPITAL AND RESERVES




50,000 


Called up share capital


50,000 


50,000 




(147,056,987)


Hedging reserve


(142,069,435)


(152,035,597)





152,475,512 



Retained earnings



147,546,187 




157,412,765 






5,468,525 



SHAREHOLDER'S FUNDS



5,526,752 




5,427,168 





 
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 2021
 




 


Called up 


Hedging 


Retained 


Total 




share 




capital 


reserve 


earnings 





£ 




£ 




£ 




£ 





At 1 January 2020


50,000 


(157,005,324)


162,352,789 


5,397,465 




Loss for the period


- 


- 


(4,940,024)


(4,940,024)




Other comprehensive income



- 




4,969,727 




- 




4,969,727 





Total comprehensive income



- 




4,969,727 




(4,940,024)




29,703 





At 30 June 2020



50,000 




(152,035,597)




157,412,765 




5,427,168 





 
Loss for the period 


- 


- 


(4,937,253)


(4,937,253)




Other comprehensive income



- 




4,978,610 




- 




4,978,610 





Total comprehensive income



- 




4,978,610 




(4,937,253)




41,357 





At 31 December 2020



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 





 
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 2021
 
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 2021.  The full accounting policies of the company, set out in the 2020 statutory accounts, have been applied in preparing this Interim Report.
 
             The financial information relating to the 6 months ended 30 June 2021 and 30 June 2020 is unaudited.
 
            The results for the year ended 31 December 2020 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.
 
Interest rate benchmark reform
            In September 2019, the IASB issued Interest Rate Benchmark Reform - Amendments to IFRS 9, IAS 39 and IFRS 7.  These amendments modify specific hedge accounting requirements to allow hedge accounting to continue for affected hedges during the period of uncertainty before the hedged items or hedging instruments affected by the current interest rate benchmarks are amended as a result of the ongoing interest benchmark reforms.  The Group will continue to apply the amendments to IFRS 9 and IAS 39 until the uncertainty deriving from the interest rate benchmark reforms with respect to the timing and the amount of the underlying cash flows to which the Group is exposed is resolved.  It is assumed that this uncertainty will end when the Group's contracts that reference Inter Bank Offered Rates, in particular LIBOR, are amended to specify the date on which the interest rate benchmark will be replaced, the cash flows of the alternative benchmark rate and the relevant spread adjustment.  This will, in part, be dependent on the introduction of fallback clauses which have yet to be added to the Group's contracts and the outcome of negotiations with lenders and bondholders.
 
2.           INTEREST RECEIVABLE AND SIMILAR INCOME
 




Audited 


 


Unaudited 


Unaudited 




year ended 


6 months 


6 months 




31 December 


ended 


ended 




2020 


30 June 2021 


30 June 2020 





£ 




£ 




£ 





5,377 


Bank interest receivable


- 


5,377 





84,989,312 



Interest receivable from Group undertakings



41,610,913 




42,574,423 






84,994,689 



 



41,610,913 




42,579,800 





 
3.           INTEREST PAYABLE AND SIMILAR CHARGES
 




Audited 


 


Unaudited 


Unaudited 




year ended 


6 months 


6 months 




31 December 


ended 


ended 




2020 


30 June 2021 


30 June 2020 





£ 




£ 




£ 





84,909,622 


Interest payable on securitised debt (Note 7)


41,541,226 


42,541,145 




- 


Fair value adjustments


- 


- 





9,948,337 



Hedge reserve recycling



4,987,552 




4,969,727 






94,857,959 



 



46,528,778 




47,510,872 





 
Fair value adjustments
 




Audited 


 


Unaudited 


Unaudited 




year ended 


6 months 


6 months 




31 December 


ended 


ended 




2020 


30 June 2021 


30 June 2020 





£ 




£ 




£ 





45,779,026 


Derivative financial instruments


(65,561,091)


59,067,077 




(18,209,165)


Securitised debt


20,140,561 


(39,097,934)





(27,569,861)



Loan to fellow subsidiary undertaking



45,420,530 




(19,969,143)






- 



 



- 




- 





 
4.           TAXATION
 




Audited 


 


Unaudited 


Unaudited 




year ended 


6 months 


6 months 




31 December 


ended 


ended 




2020 


30 June 2021 


30 June 2020 





£ 




£ 




£ 





 


Tax charge


 


 





- 



Current tax chargeable to income



- 




- 






- 



 



- 




- 





 


 
Tax reconciliation


 


 





(9,877,277)



Loss on ordinary activities before taxation



(4,929,325)




(4,940,024)





1,876,683 


Tax on loss at UK corporation tax rate


936,572 


938,605 




 


Effects of:


 


 




(1,890,184)


Fair value movements


(947,635)


(944,248)





13,501 



Group relief



11,063 




5,643 






- 



 



- 




- 





 
5.           DEBTORS
 




Audited 


 


Unaudited 


Unaudited 




31 December 


30 June 


30 June 




2020 


2021 


2020 





£ 




£ 




£ 





 


Due within one year:


 


 




45,883,288 


Loan to fellow subsidiary undertaking


45,560,290 


45,903,410 





3,580,353 



Amounts owed by fellow subsidiary undertakings



4,869,354 




1,954,976 






49,463,641 



 



50,429,644 




47,858,386 





 


 
Due after more than one year:


 


 





1,677,350,801 



Loan to fellow subsidiary undertaking



1,615,808,366 




1,684,673,289 






1,677,350,801 



 



1,615,808,366 




1,684,673,289 





 
The loan to a fellow subsidiary undertaking comprises:
 




Audited 


 


Unaudited 


Unaudited 




31 December 


30 June 


30 June 




2020 


2021 


2020 





£ 




£ 




£ 





1,710,200,552 


Brought forward


1,706,676,001 


1,710,200,552 




(29,325,200)


Repaid in period


(14,662,600)


(14,662,600)




(1,769,231)


Amortisation of issue premium


(847,749)


(895,370)




(1,233,839)


Accrued financing expenses


(611,556)


(613,236)





28,803,719 



Fair value adjustment


(45,420,530)


19,969,143 





1,706,676,001 



Carried forward



1,645,133,566 




1,713,998,489 





29,325,200 


 
Payable within one year or on demand


29,325,200 


29,325,200 





1,677,350,801 



Payable after more than one year



1,615,808,366 




1,684,673,289 






1,706,676,001 



 



1,645,133,566 




1,713,998,489 





 
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 amount of the loan due within one year comprises £16,235,090 (31 December 2020 - £16,558,088) of interest and £29,325,200 (31 December 2020 - £29,325,200) of capital.
 
The A7, B3 and C2 tranches of the intercompany loan are carried at fair value. The A1, A3, B and D2 tranches are carried at amortised cost.  The total fair value of the loans to fellow subsidiary undertakings at 30 June 2021 was £1,879,888,826 (31 December 2020 - £1,969,316,124), 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 




2020 


2021 


2020 





£ 




£ 




£ 





45,935,937 


Securitised debt (Note 7)


45,613,828 


45,970,347 




1,660,594 


Amounts owed to Group undertakings


2,952,593 


- 





- 



Accruals and deferred income



8,460 




8,952 






47,596,531 



 



48,574,881 




45,979,299 





 
The amount of the securitised debt due within one year comprises £16,288,628 (31 December 2020 - £16,610,737) of interest and £29,325,200 (31 December 2020 - £29,325,200) of capital.
 
7.           CREDITORS: Amounts falling after more than one year
 




Audited 


 


Unaudited 


Unaudited 




31 December 


30 June 


30 June 




2020 


2021 


2020 





£ 




£ 




£ 





1,282,476,486 


Securitised debt


1,286,495,142 


1,276,510,923 





394,874,315 



Derivative financial instruments



329,313,224 




408,162,366 






1,677,350,801 



 



1,615,808,366 




1,684,673,289 





 
The amounts at which borrowings are stated comprise:
 




Audited 


 


Unaudited 


Unaudited 




31 December 


30 June 


30 June 




2020 


2021 


2020 





£ 




£ 




£ 





1,361,105,263 


Brought forward


1,311,801,686 


1,361,105,263 




(29,325,200)


Repaid in period


(14,662,600)


(14,662,600)




(1,769,231)


Amortisation of issue premium


(847,749)


(895,370)




(1,233,839)


Accrued financing expenses


(611,556)


(613,236)





(16,975,307)



Fair value adjustment



20,140,561 




(39,097,934)






1,311,801,686 



Carried forward


1,315,820,342 


1,305,836,123 




29,325,200 


 
Payable within one year or on demand


29,325,200 


29,325,200 





1,282,476,486 



Payable after more than one year



1,286,495,142 




1,276,510,923 






1,311,801,686 



 



1,315,820,342 




1,305,836,123 





 
The company's securitised debt was issued in tranches, with notes of classes A1, A3, A7, B, B3, C2 and D2 remaining outstanding.  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 2021 £13,050,384 (31 December 2020 - £13,896,133) remained unamortised.
 
At 30 June 2021, there were accrued financing costs of £16,732,866 (31 December 2020 - £17,344,422) relating to increases in margins as described below.
 
The notes are secured on 6 properties at Canary Wharf, owned by fellow subsidiary undertakings, and the rental income stream therefrom.
 
The securitised debt has a face value on 30 June 2021 of £1,399,524,721 (31 December 2020 - £1,414,187,320), of which £734,963,720 (31 December 2020 - £749,626,320) carries fixed rates of interest between 5.95% and 6.8%.  The other £664,561,001 (31 December 2020 - £664,561,000) of the securitised debt carries floating rates of interest at LIBOR plus a margin.  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 5.30% and 6.74%.
 
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 2021 was £1,550,575,602 (31 December 2020 - £1,574,441,809).  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 2021, the fair value of the interest rate derivatives resulted in the recognition of a liability of £329,313,224 (31 December 2020 - £394,874,315).  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 2021, AIG had posted £107,052,226 as cash collateral in respect of this obligation.
 
The company also has the benefit of a £300 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.
 
8.           CONTINGENT LIABILITIES AND FINANCIAL COMMITMENTS
 
As at 30 June 2021 and 31 December 2020, 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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