SEGRO, the European industrial REIT, has secured a new revolving credit facility (RCF) as well as restructuring and extending an existing syndicated bank facility, in a truly global roster of 10 commercial and investment banks across Europe, the US and Asia.
The two RCFs announced this morning reduce SEGRO’s debt capital headroom from £730m to £380m, in a move to better balance the industrial REIT’s liquidity and investment requirements in line’s with its stated ambitions to build its logistics property portfolio.
The first RCF is a €225m (£186m) revolving multi-currency, five-year syndicated bank facility, replacing an existing equivalent €395m facility. The new facility has been put in place with a strong group of relationship banks.
SEGRO’s lenders comprise four UK clearers – Barclays Bank, HSBC Bank, Lloyds Bank and Santander Global Banking & Markets – as well as Bank of China’s London branch and Bank of America Merrill Lynch. All except BAML were mandated lead arrangers and bookrunners, while BAML is lead arranger.
As a result of putting the new facility, SEGRO has cancelled three separate facilities together amounting to €395m, comprised of: a €240m syndicated facility which was due to mature in December 2015, a €100m bilateral facility which was to mature in July 2014 and a €55m bilateral facility maturing in November 2016.
The lenders across the three cancelled facilities are the same as the overall roster of 10 relationship banks in the two RCFs announced today.
The second announced credit facility this morning is the extension and downsizing of a multi-currency facility from €385m to €235m (£194m) with the existing syndicate of lenders comprised of the same six banks as well as Royal Bank of Scotland and JPMorgan.
The RCF’s margins have been reduced and extended by 18 months to May 2018. The initial headline margin payable under both the above facilities for the first third of utilisation is 125 basis points, which reflects circa 25 basis points lower than SEGRO’s average margin level prior to these two refinancings.
SEGRO’s statement highlighted three benefits of these two refinancings: reducing overall pricing of the group’s unsecured bank facilities, establishing a longer-dated and debt maturity profile as well as reducing annualised fees commitment on by an estimated £2m, based on current undrawn levels.
Both facilities are undrawn at present while SEGRO’s overall group debt, as at December 2013, standing at £1.89bn, including share of joint venture debt, with £1.65bn excluding JV debt. Currently, 100% of SEGRO’s debt is through corporate bonds, although this is targeted to eventually reduce to around 80% with the balance from the usage of these new facilities.
Justin Read, SEGRO’s group finance director, said: “The signing of these facilities demonstrates the ongoing support of our relationship banks for SEGRO and its strategy and we look forward to continuing to work with them in the future.
“This refinancing makes our committed bank facilities more cost effective, whilst improving the debt maturity profile of the group. The restructured facilities will also provide an appropriate level of unsecured bank funding to support the ongoing delivery of our strategy, whilst ensuring that SEGRO continues to maintain a strong liquidity position.”
At the end of 2011, SEGRO confirmed plans to sell-off £1.6bn in assets the industrial REIT decided were non-core. By the end of last year, this had reduced to £440m which is now estimated to have reduced further to just over £400m.
The remaining assets – a mixture of granular and larger lot sizes – are targeted for a gradual disposal over the next two years, in keeping with best value capture for assets in less liquid European markets, including Italy, and to enable SEGRO to manage the orderly investment of the proceeds.
In February, the SEGRO European Logistics Partnership (SELP) exchanged contracts to acquire a portfolio of prime logistics assets and development land in Germany, Poland and France for €472m (£393m) from two funds, one managed by Tristan Capital Partners (CCPIII) and the other co-managed by Tristan Capital Partners and AEW Europe (EPISO).
SELP is a 50-50 joint venture between SEGRO and PSP Investments, one of Canada’s largest pension investment managers.