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Student housing firm Unite opts for £500m of debt

HSBC and RBS provide a revolving credit facility and bridge loan.

Unite Group, the UK student housing specialist, has signed unsecured debt facilities totalling £500 million (€565 million) with HSBC and Royal Bank of Scotland.

The loan facilities comprise a five-year, £350 million revolving credit facility and a one-year £150 million bridge loan, replacing a £280 million secured debt facility.

The new facilities will increase the debt maturity by 12 months and, with an initial margin of 145 basis points, reduce the average cost of debt, when fully drawn, from 4.2 percent to 3.9 percent, the firm said.

“The reduction in the cost of debt will contribute to the earnings growth trajectory over the next few years,” said Joe Lister, chief financial officer of Unite.

Unite intends to replace the bridge loan during the first half of 2018 with longer term unsecured debt to extend its maturity profile and diversify its sources of finance, the firm said.

As part of the transaction, interest rate swaps with a notional principal of £220 million have been cancelled at a cost of £9.5 million. The swaps had a carrying value of £10 million as at 30 June 2017, which will result in a saving of £1.8 million per year.

The student accommodation developer and manager said it will continue to fix interest rates on most of investment debt going forward.

Unite has also secured an investment grade corporate rating of BBB from Standard & Poor’s and Baa2 from Moody’s.