1st May 2014 10:59
LONDON (Alliance News) - Invista European Real Estate Trust SICAF Thursday said it has agreed a new EUR220.0 million credit facility with an affiliate of US investment and advisory firm Blackstone Group LP, meaning it has been able to repay debts without shareholders having to foot the bill.
The new loan, which has a three-year maturity, is being provided by Blackstone Real Estate Debt Strategies, and will give Invista more time to manage or dispose of certain properties.
The economic interest of the loans which were made by Bank of Scotland to Invista was sold in November 2013 to funds affiliated to Cerberus Capital Management LP.
Invista has the option to extend the maturity by two additional twelve-month periods. The initial margin has been set at 770 basis points over three-month Euribor, with an agreement to potentially reduce that to 470bp. Once the new loan has been reduced to EUR135.0 million, and as long as the loan-to-value ratio is below 70%, the margin will be reduced, it said. Before the conditions of the reduction are met, a so-called cash sweep will be applied to the company's income.
That means no distributions to ordinary or preference shareholders can be made for the duration of the cash sweep, with the preference share dividend therefore being accrued.
"The company regards making the repayments necessary to eliminate the cash sweep as an objective of the highest priority," Invista said.
The company is currently pursuing an asset disposal program that would see the sale of 14 assets as a group.
The new loan will enable Invista to pursue the plan by providing EUR85.0 million of freely prepayable proceeds which can be repaid via asset sales or contributions of additional equity.
Any early repayments beyond the first EUR85.0 million, or any repayment from the proceeds of properties that are not designated as part of the disposal programme, will trigger an early redemption premium equivalent to the full interest rate on the amount repaid for the balance of that period.
The interest cost of the new loan will initially account for the majority of the Invista's expected income, meaning it has "low levels" of working capital as a result of the costs of the refinancing.
However, the lower margin, if triggered, would leave Invista with "more substantial income attributable to shareholders" and open out the range of options for future strategy, Invista said.
"[The] actions being pursued with the support of Blackstone, consolidating the portfolio around core logistics while enhancing the value of the company's German retail properties through selective capital expenditure, should strengthen the longer term position of the company," it said.
Invista said it has explored "a large number of avenues" for refinancing with both existing and potential new lenders but decided the Blackstone option represented the best move.
Invista European Real Estate Trust shares were Thursday quoted at 3.25 pence, up 76%, while the preference shares were up 27% at 72.00 pence.
By Samuel Agini; [email protected]; @samuelagini
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