Simon Property Enhances Credit Facility, Lowers Cost Of Debt
Zacks Investment Research | Mar 17, 2020 09:57PM ET
Simon Property Group Inc. (NYSE:SPG) recently fortified its balance-sheet strength by amending and extending the company’s existing $4-billion senior unsecured multi-currency revolving credit facility with a $6-billion senior unsecured credit facility.
The latest facility comprises a $4-billion multi-currency revolving credit facility and a $2-billion delayed draw term loan facility. The amended facility has the feature that enables Simon Property to avail an expansion of the total amount facilities up to $7 billion in the shape of additional revolving commitments and/or additional term loans.
While the maturity date for the revolving facility is Jun 30, 2024, and Jun 30, 2022 for the term, there are provisions to extend the maturity date of each facility for a period of up to one year. Also, funds from the revolving facility can be withdrawn in currencies, including U.S. dollars, Euro, yen, Sterling Canadian Dollars and Australian Dollars.
As a result of the above-mentioned move, the company will enjoy a cheaper line of credit, in turn, reducing annualized interest expense. Specifically, pricing under the facility has been slashed by 7.5 basis points (bps) and is currently at LIBOR plus 70 bps. The pricing also depends on the company's public debt ratings.
The move will also improve the company’s financial flexibility. The total credit capacity of the company stands at $9.5 billion, when this refinanced $6-billion facility is combined with the existing $3.5-billion senior unsecured credit facility. With a solid balance sheet, the company has ample scope to deploy capital for long-term growth opportunities.
Notably, with the shift in consumers’ preferences toward online channels for purchases, bankruptcies and store closures have emerged as pressing concerns for retail REITS, including Simon Property, Kimco Realty Corp. (NYSE:KIM) , The Macerich Company (NYSE:MAC) and SITE Centers Corp. (NYSE:SITC) .
However, amid retail apocalypse, adoption of an omni-channel strategy as well as tie-ups with premium retailers have been beneficial for Simon Property. The company has been actively restructuring its portfolio, aiming at accretive acquisitions and transformative redevelopments.
Moreover, last month, Authentic Brands Group, Simon Property and Brookfield Property Partners announced the acquisition of fast fashion retailer, Forever 21, which had filed for bankruptcy. The companies have formed an alliance, per which ABG and Simon Property will each own 37.5%, while Brookfield will own 25% of the intellectual property and operating businesses. Additionally, the company has agreed to acquire Taubman Centers in a deal valued at $3.6 billion. Such efforts augur well for the company’s long-term growth.
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