Big Yellow reduces the cost of its debt financing

BYG : Big Yellow reduces the cost of its debt financing

Big Yellow Group has announced that it has completed the refinancing of its existing bank facilities. This will lead to both a lower average cost of debt (from 4.6% to 3.7%) and an increased average unexpired term of its debt facilities to 7.8 years. Key features are as follows:

1) Big Yellow has secured a five year £145m loan facility with Lloyds Bank and HSBC Bank, expiring in August 2019. 50% of this facility is a term loan, whilst the other 50% is a revolving loan facility.  The term loan pays a margin of 1.75% and the revolving loan a margin of 1.5%, reflecting a reduction of 0.75% from the previous facility. On completion this facility has £72m drawn down.

2) In addition, Big Yellow has signed a new £70m facility with M&G Investments Limited. This has a seven year term, from the date of drawdown, which can occur at any time up until to 29 June 2015. The loan will be secured over a portfolio of 15 freehold self storage centres. 50% of the seven year loan is fixed by way of a forward start interest rate derivative, the balance of the loan is variable based off three month LIBOR plus margin. The average cost of the M&G loan at the current rate of LIBOR will be 3.75%.

3) The Group bank facility requires Big Yellow to have 50% of all borrowings fixed. As such, Big Yellow has cancelled £40m of its existing interest rate derivatives at a cash cost of £1.4m. Reflecting this, Big Yellow has also agreed a short term bridging facility of £70m with Lloyds Bank, which is repayable immediately on the drawdown of the M&G loan.

Based on current LIBOR levels, Big Yellow expects that once the M&G facility has been drawn down, and the Lloyds bridging loan being repaid, its average cost of debt will be approximately 4.2%.