Unite Group plc, the UK’s largest provider of student accommodation, is pleased to announce that it has secured an investment grade credit rating and arranged a new five year unsecured debt facility providing Unite Students with reduced financing costs, a greater level of flexibility and ability to diversify sources of funds to support ongoing growth.
The new £500 million unsecured debt facility provides additional financing headroom for the development pipeline and greater financial flexibility. The new facilities will increase the debt maturity by 12 months, and with an initial margin of 145bp, will reduce the average cost of debt, when fully drawn, to 3.9% from the current level of 4.2%.
The Group is also pleased to announce that it has been assigned an investment grade corporate rating of BBB from Standard & Poor’s and Baa2 from Moody’s reflecting the strength of Unite’s capital position, cash flows and track record.
The new 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 Group intends to replace the bridge loan during the first half of 2018 with longer term unsecured debt to further extend our maturity profile and diversify our sources of finance.
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. These swaps had a carrying value of £10.0 million as at 30 June 2017. This will result in a saving of £1.8 million per annum. We will continue to fix interest rates on the majority of investment debt going forward.
The syndicate for the new facilities consists of HSBC Bank plc and The Royal Bank of Scotland plc. Rothschild & Co acted as rating advisor to Unite.
Joe Lister, Chief Financial Officer of Unite Group plc commented:
“I am excited that we have taken this step to a rated, unsecured debt structure. The rating demonstrates the robustness of our business and the new facility will support the delivery of our existing strategy. The reduction in the cost of debt will contribute to the earnings growth trajectory over the next few years.”
Andy Armstrong, Head of Real Estate, UK, Europe and Middle East at HSBC said:
“HSBC is delighted to continue its long term relationship with Unite. The move to a rated unsecured debt structure is a key step for Unite as it delivers on its strategy.”
Paul Coates, MD, Real Estate Finance for the Royal Bank of Scotland said:
“RBS has supported Unite for more than 20 years and we are pleased to continue backing them with this new debt facility. Unite’s achievement of an investment grade rating is an important development for the Group as well as the wider purpose built student accommodation market as it continues its growth into an established asset class.”
For further information, please contact:
Joe Lister, Chief Financial Officer
Tel: +44 117 302 7005
Candice Macdonald, Head of Communications
Tel: +44 7525 592521