3rd Jul 2019 18:33
(Alliance News) - Merchants Trust PLC said Wednesday it has entered a three-year revolving credit facility with Scotibank Europe PLC for GBP42 million.
Proceeds from the facility will go towards making an early repayment of the trust's borrowings of GBP42 million from Fintrust Debenture PLC on August 7, which will significant reduce the cost of debt.
Merchants Trust currently has two tranches of debt from Fintrust, one which is worth GBP30 million and was issued in 1993 at an interest rate of 9.5%. The second is for GBP12 million , assumed from an existing borrower in 1998 at an interest rate of 6.0%.
The debt was due to mature in 2023, and the total cost to redeem it is GBP56.2 million plus accrued interest.
The refinancing will also enhance both the revenue earnings and capital returns. Although the cost of redemption will initially reduce the net asset value per share by 0.5% with debt at fair value, the refinancing is expected to reduce the total annual interest costs by around GBP2.9 million.
"The refinancing of the company's long-term debt - introducing a balance of short-, medium-, and long-term debt enables the board to manage gearing more proactively. This will not only lower the cost of debt in a significant way and benefit performance, it will help us carry on our legacy, so we can continue to build on our 37 consecutive years of dividend growth," said Chair Simon Fraser.
Shares in Merchants Trust closed 0.2% higher at 498.00 pence on Wednesday.
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