Segro gets share boost after reworking EUR 1.9 bn covenants

Segro's battered share price got a large strong boost on Wednesday as the UK industrial property real estate investment trust (REIT) announced it had renegotiated loan covenants to give itself more breathing room.

The market responded positively to the news and Segro's shares were up more than 13% during the day at 103 p. Last week the share crashed to 84.5 pence as investors worried Segro had not followed British Land, Land Securities and Hammerson in announcing a rights issue to strengthen its balance sheet.

Segro said on Wednesday that it had signed agreements with syndicate banks and bilateral lenders that provide £1.7 bn (EUR 1.9 bn) of debt - both drawn and undrawn - to permanently increase the maximum gearing covenant (net debt to net worth) in these facilities, from 125% to 160%.

Following the agreement, Segro's lowest gearing covenant across all of its debt and undrawn credit facilities is 160%. Interest cover covenants, which require net rental income to cover net interest charges by 1.25 times, remain the same.

In a statement, Segro said: 'The group continues to operate within all of its debt covenants even without the amendments, but in the current uncertain economic environment and difficult property market conditions, SEGRO believes that the amendments provide valuable additional headroom.'

Gearing covenants on Segro's £1.3 bn of corporate bonds which mature between 2010 and 2035 remain at 175%. As part of the agreements, SEGRO is to pay a one-off fee of £8.6 mln.