The new £150m facility replaces the existing £120m facility and will represent 11% of Grainger’s £1.37bn total group facilities. Grainger now has no further significant facility maturities until 2020.
The margin on the fresh facility has been reduced by 85bps to 170bps and the structure “enables further pricing benefits to be gained at future lower levels of loan to value”, Grainger said in a statement. All other covenants remain unchanged.
Yesterday, Standard & Poor’s Ratings Services upgraded its issue rating on £275m senior secured notes by two notches to’ BB+’, raising the outstanding debt to investment grade status.
S&P’s re-rating is based on their “our expectations of higher recovery for noteholders at default. We based these actions on our improved valuation of the group’s assets”.
According to S&P, Grainger’s gross assets value in a hypothetic scenario of default would be £1.12bn. Less £78m in administrative costs, this would leave net value available to creditors: £1.04bn.
S&P’s scenario testing includes £938m in secured debt claims, for which the recovery expectations have risen to between 90%-100%.
The senior secured notes, due 2020, have floating charges over all of the properties and assets of the issuer and guarantors.
S&P said: “We view the security and guarantee package as comprehensive, and we acknowledge that it is shared with M&G Investments’ £100m senior secured facility.
“Under our hypothetical default scenario, we assume a default in 2020 that would be on the back of an economic downturn in the UK, which would pull house prices down and could severely reduce the group’s cash flow generation.
“Our stressed valuation comprises the stressed value of the assets pledged as security for the bonds as well as the discounted value of the equity in non-pledged entities.”
Grainger announces its full year results on 19 November.