Empiric Student Property has suspended payment of its dividend to cover an expected hit on income due to the coronavirus pandemic.
The group said in a worst case scenario it could lose up to £21m of revenue this academic year, as it allows students to exit their rental agreements early due to the enforced lockdown.
All of Empiric’s residences remain open, but the group said it would look favourably upon requests on a case by case basis from its residents to be released from their lease obligations from 25 April 2020 onwards. The group has received around 91% of all budgeted revenues due to it for the current academic year.
For the 2020/21 academic year, the group said it expects occupancy and rental rates to be lower. Bookings for the 2020/21 academic year are currently marginally ahead of the same time last year, however.
Suspending all future dividends distributions “until market conditions stabilise”, as well as other cost saving exercises, will reduce its cash outflows in the remainder of the 2020 calendar year by around £26m.
As at 31 December 2019, the group had debt facilities of £390m, a loan to value (LTV) of 33% with an all-in average interest payable of 3.2% per annum and a weighted average term of 6.6 years.
Its banking covenants comprise an LTV covenant of 65% and an Interest Cover Ratio (ICR) covenant of 216%. Its actual ICR is 397%.
The group currently has £10m of cash and £57m of undrawn debt facilities available. It has £32.8m of re-financing remaining due in 2020 and is in the late stages of legal finalisation with the existing bank, having obtained final credit approval on 12 March 2020. This facility is for four years and on more favourable terms than the current facility.
Following this, the group will not have to refinance any debt before November 2022.
ESP : Empiric Student Property suspends dividend