Great Portland Estates plc (GPE) announces a series of measures to enhance the Groups financing structure by shifting the emphasis away from long-dated secured debt to medium-dated unsecured debt, while optimising the interest cost.
The company is replacing its existing bank facilities with a new £300 million committed facility. Initially committed until 2011, the facility can be extended by the Group, with the banks agreement, after the first and second anniversaries to 2012 and 2013 respectively. The facility has been provided by Barclays, Lloyds TSB, Royal Bank of Scotland, Calyon and Eurohypo at an interest cost significantly below the two previous facilities which have been cancelled.
GPE has also signed a new £110 million one year committed facility with Barclays and Royal Bank of Scotland, which can be extended for a further year at the Groups option without the need for further bank consent.
Separately over the last week, GPE has purchased £62 million nominal or 66% of the outstanding issue of its 7.25% debenture stock 2027. The debentures have been purchased in the market at a total cost (before accrued interest) of £88 million. £32 million nominal now remains outstanding, out of an original issue size of £100 million nominal.
These transactions will benefit the Group by:
- extending the Groups major facility refinancing date from 2009 to 2011/13;
- enhancing adjusted earnings per share and improving interest cover;
- reducing the Groups fully drawn average interest cost by around 40bp pa.;
- increasing NAV per share growth from 2006/07;
- releasing around 100 million of asset encumbrances to improve operational freedom;
- providing tax relief to shelter the Groups expected 2005/06 tax charge; and
- creating additional financial resources to fund the Groups growing development programme and potential acquisitions.
As a result of the redemption premium on the debenture purchases, the Groups adjusted NAV per share will be impacted by approximately 10p (net of tax relief). The triple NAV (adjusting for marking debt to market and for the contingent liability to taxation on chargeable gains) will be largely unaffected by this transaction.
Commenting on the above, Timon Drakesmith, Finance Director, said
We are delighted to have gained the support of a high quality banking group who have committed to refinance our exciting growth plans. We have more than doubled the Groups facilities, reduced the margin over LIBOR by a quarter and extended the maturity of the main facilities until at least 2011. The debenture repurchase will also create significant financing and flexibility benefits for the Group.