UK long income REIT LXi has inked a new, £150 mln (€170 mln) 16-year, interest-only term loan signed with an insurance company, a new lender to the group.
LXi has also signed an extension to its existing HSBC facility of £60 mln.
The new facility carries an attractive margin of 1.75% per annum. Upon drawing of the loan, the all-in rate will be fixed to maturity at the margin plus the prevailing UK Treasury 2039 Gilt rate on the date of drawdown.
Drawing the new facility is conditional on finalising market-standard property due diligence and the redemption of certain of the company’s existing financing arrangements with shorter-term maturities and release of the associated security. This is expected to take place in the coming weeks.
The new facility will be secured against a ring-fenced pool of assets, without recourse to the wider group, and it provides the company with substantial covenant headroom together with appropriate remedial cure rights ahead of any potential breach trigger.
The LTV default covenant has been set at 60%, requiring a 33% fall in the value of the secured assets to trigger a breach from the day one valuation. The interest cover ratio default covenant has been set at 170%, requiring a 32% fall in the net rental income of the secured assets to trigger a breach.
The company has also agreed a short-term extension of the term of its existing £60 mln loan with HSBC which now matures in December 2024, with a further six-month extension option subject to lender consent.
The shorter-term nature of the HSBC facility provides the company with additional optionality on potential asset management and debt capital markets initiatives.
Following the extension, the HSBC Facility now carries a margin of 2.05% per annum above the Sterling overnight index average (sonia) and benefits from an existing interest rate cap until July 2023 at 1.84%.
The company has also agreed an increase in the LTV default covenant to 55% (from 50%), now requiring a 40% fall to breach. The interest cover ratio default covenant remains at 150% and the company expects to continue to cap the interest rate risk at a level continuing to provide significant headroom.
The two facilities represent the first step of the company’s wider refinancing strategy to replace all of its near-term debt maturities.
The second step is at an advanced stage of negotiations with agreed heads of terms, with a club comprising a number of the company’s existing lenders.
