AIG lends £316m to complete £903m SIR refinancing

AIG Asset Management has provided a £315.6m, ten-year facility to Secure Income REIT (SIR) to complete its £902.6m refinancing of its leisure and healthcare assets.

AIG’s fixed-rate, non-recourse term loan is secured on a portfolio of SIR’s healthcare assets containing 11 UK private hospitals.

The facility joins Blackstone mortgage REIT’s and Rothesay Life’s £367m non-recourse term loan to refinance SIR’s leisure portfolio, and Legal & General’s £220m secured against a portfolio of nine UK private hospitals let to the Ramsay Group.

The total secured debt of £902.6m has a weighted average cost of 5.3% and an average term to expiry of nine years. The total portfolio of leisure and healthcare assets is valued at £1.347bn, reflecting an overall loan-to-value of 67%.

“This marks the final stage of the refinancing with long term, cheaper debt,” said Martin Moore, SIR’s chairman. “In conjunction with the asset sales completed earlier this year, this means that SIR can now begin to pay out a dividend, expected to commence next autumn, ahead of the timescales anticipated at the time of the IPO last year.”

SIR, which is externally managed by Nick Leslau’s Prestbury Investments, floated as a real estate investment trust on the AIM segment of the London Stock Exchange in June last year.

Its new loans, together with capital raised from the £330m sale of Madam Tussauds to Fubon Life in August, have repaid £849m of the group’s secured loans, which amounted to £1.16bn at the beginning of the year and were due in 2017.

Bank of Scotland (BOS) held some 86% of that total debt and through its specialist equity investment arm, was also an equity investor in the original acquisitions. BOS’s original equity investment resulted in a current 23.6% shareholding in SIR.

Following an approach by the company to BOS, an agreement was reached such that swap break costs, and other fees that would otherwise have crystallised as a result of the accelerated repayment of the group’s loan facilities, will be reduced by up to 30% of swap break costs, subject to a maximum of £27.5m, with amounts saved depending on the amount and timing of any early repayments.  SIR said this is in recognition of the economic advantages to BOS of early debt repayments.

The first agreement has been met and £70.5m of swap break costs cut by £14.1m.