LONDON (Alliance News) - F&C Commercial Property Trust Ltd Thursday said it has agreed terms for a new ten-year term loan facility with Legal & General.
The facility will be used to refinance GBP230 million of secured bonds the trust issued through a special purpose vehicle in March 2005, as well as GBP30 million it has drawn down under a Barclays Prime Four facility, both due to be repaid on June 30, 2015.
The L&G facility will entitle the group to draw down up to GBP260 million to finance the repayments. The facility will not be secured over the group's remaining assets.
The trust said the proposed loan with L&G is on attractive terms and is expected to improve the returns to shareholders over the longer term.
F&C Commercial Property Trust said interest on the L&G facility will be at the rate of 1.1% per annum over ten-year gilts. Based on current gilt rates, the trust said the total interest rate payable under the L&G facility will be approximately 3.1% per year, which it said is significantly lower than the interest rate on the current bonds.
It said total estimated costs for putting in place the L&G facility and repaying the bonds and the Barclays facility will be about GBP2.7 million.
The trust said it intends to give notice to the issuer of the 2015 bonds for repayment of the bonds on December 31. It expects that the group will fix the interest rate payable, and draw down the full amount available, under the L&G facility prior to that date. It is expected that the Barclays Prime Four facility will be repaid at or around the same time, the trust said.
However, the group will have to pay an early repayment penalty on the bonds, which is estimated at about GBP5.5 million and is in addition to the GBP2.7 million.
"The board believes that it is in the interests of the group to repay the bonds early to ensure that the group has certainty of available funds in advance of the fixed repayment date of June 30, 2015, and so that the group can take advantage of the current availability of long-term borrowings from L&G at attractive rates of interest," the trust said.
Although there is no early repayment penalty for the Barclays Prime Four facility, the trust will be liable for the cost of breaking the relevant interest-rate swap. It said the cost at the end of September is reflected in its current net asset value per share and that it will meet the repayment penalty for the bonds and the interest rate swap breakage cost from its existing cash.
The trust's articles of association also require the board to allow shareholders to vote on the continuation of the company at its annual general meeting in 2015.
"In the light of the proposed refinancing, the board is proposing a resolution to remove the obligation in the articles to hold the continuation vote in 2015 and five yearly thereafter and to replace it with an obligation to hold a continuation vote in 2024, ie prior to the repayment date of the L&G facility," the trust said in a statement.
The trust also wants to amend the policies it has in place to control the discount at which its shares trade to net asset value in order to "better reflect" market conditions.
The trust's shares were Thursday quoted down 0.2% at 124.20 pence.
By Samuel Agini; samagini@alliancenews.com; @samuelagini
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