More quoted property companies are seeking to extend their debt maturities by putting long-term financing in place. Big Yellow plans to refinance part of its £275m of bank loans into £100m of 12-14 year debt, while rolling over the remainder into new five-year debt.
Chief executive Jimmy Gibson and chief financial officer John Trotman outlined the plan to analysts at Espirito Santo bank this month. Analysts Michael Burt and Jon Stewart said: “The company’s unsustainably low 3.6% cost of debt factors heavily in management’s plans for the business.”
They added that while the balance sheet is restructured, and to offset an expected rise in debt costs, Big Yellow plans to degear through operating cashflow, limiting dividend payouts “in the near-term”.
Meanwhile, Development Securities has arranged a new £22.5m, fixed-rate, 14-year debt facility at a 5.48% interest rate in its second deal with Aviva. The loan refinances five assets, four of which DevSec bought with the proceeds of a £100m placing and rights issue last August, and one where the bank borrowing had been paid down 18 months ago.