Unite completes new £121 million debt facility with Legal & General (UK)

The Unite Group plc, the UK's largest developer and manager of student accommodation, announces that it has secured a new £121 million (approx. €148 million), 10-year debt facility with Legal & General.

The all-in cost of the new borrowing, which is at 60% loan-to-value, is fixed at 5.05% for the duration of the loan. The loan will amortize to £109 million, 55% loan-to value, by 2022.

Together with headroom in other existing facilities, the new loan provides capacity to pay down the Group's remaining facilities that mature in 2013, extending its next refinancing event until May 2014. Following the refinancing, the Group's weighted average debt maturity increases to 3.5 years.

The transaction reduces the Group's see through cost of debt by 10 basis points from 5.7% at December 31, 2011 to 5.6%, generating proforma annual savings of approximately £0.6 million. These savings will offset the swap break costs amounting to £4.7 million (3 pence per share) that have been incurred as part of the transaction and will be recognized in the first half of 2012.

Following the transaction the proportion of the Group's debt that is hedged has increased from 69% at December 31, 2011 to 80%.

The debt facility represents Legal & General's first real estate debt financing deal and has been arranged by LGIM (Legal & General Investment Management) Commercial Lending Ltd ('CLL'), which was established in May 2011 and which also acts as facility agents.

The new loan forms part of Unite's strategy to introduce new lenders to the Group, particularly from non-bank sources, and brings the total amount of new debt raised in 2012 to over £200 million.

Joe Lister, Chief Financial Officer for the Unite Group, said: "Securing this new, long term facility with a lender of Legal and General's quality, is further testament to the strength of Unite's business and marks an important step for the Group. We have now arranged over £400 million of new debt facilities for Unite and its funds in the last 12 months.

"Controlling gearing levels and extending debt maturities remains a key priority for Unite and we will continue to work closely with our financing partners to further strengthen the Group's financial position over the year. Our long track record and recent successes in raising new finance give us continued confidence for the future."

Ashley Goldblatt, Head of Commercial Lending at Legal & General Investment Management, comments: "Having looked at the market in depth over the last year and with an experienced team in place, this first, sizeable, complex transaction answered our objectives in developing this area of our business. v represents a market leader, with a strong track record, operating in a resilient but non-traditional sector of the real estate market.

"Additionally we have proven ourselves capable of taking a more flexible approach to lending, as is seen in the ten year loan term. Traditionally insurance companies have restricted themselves to long term loans, of 15/20 years or more, that match their long dated liabilities, whereas those banks that are still willing or able to lend are only prepared to do so on short terms. This is a space that we feel comfortable in filling."

Source: FTI Consulting

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