U.K. self-storage operator Big Yellow Group PLC has entered into a new £100 million (about $162 million) 15-year loan with Aviva Commercial Finance Limited, secured over a portfolio of 15 wholly owned self-storage facilities valued in February, at £242.1 million (about $392.7 million). The annual fixed interest rate on the loan is 4.9 percent.
The loan was deployed to repay and cancel £100 million of the group's core bank debt facility, reducing it to £225 million (about $365 million), of which £190 million (about $308 million) is drawn. This facility will expires in September 2013 and is secured on the remainder of the group's self-storage centers. The repayment and cancellation has been disproportionately applied against German commercial banker HSH Nordbank's commitment, which has been reduced from £150 million (about $243.3 million) to about to £65 million (about $105.4 million).
The group has cancelled £100 million of interest-rate derivatives at a cost of £9.2 million (about $14.9 million). In addition to the Aviva fixed-rate loan, there is a residual £90 million (about $146 million) interest-rate swap in the core bank debt facility at 2.99 percent interest plus margin to September 2015. The remaining £100 million of the core bank debt will be paid at floating rates plus margin. As a result, Big Yellow has repaid £100 million of bank debt, which was costing 4.8 percent per year, with the new loan. The Group's proforma average cost of debt remains at 3.7 percent.
The loan amortizes to £60 million (about $97.3 million) over the course of the 15 years, consistent with the group's medium-term debt reduction strategy. The debt service is payable monthly based on fixed annual amounts. The loans outstanding on the fifth anniversary will be £89.8 million (about $145.7 million); £76.7 million (about $124.4 million) on the 10th anniversary, with £60 million set to expire in April 2027.
"We are delighted to have arranged this new loan with Aviva, which provides a stable core of long-term financing for the group from a new debt provider to the business," said John Trotman, chief financial officer of Big Yellow. "We will now enter into discussions with our banking group, who continues to be supportive, with a view to refinancing the core bank debt facility in the current year."
Big Yellow also completed the sale of its facility in Blackheath, London, to Hexagon Housing Association Ltd. for £4.5 million (about $7.3 million). In addition, the company has exchanged contracts on the sale of the surplus one acre site adjacent to its new flagship Chiswick, London, store for £4.8 million (about $7.7 million), with completion expected in July. The Premier Inn hotel the group is developing in Richmond, London, is due for completion this summer, with further proceeds to be received on the sale of the building of £7.4 million (about $12 million). On March 31, the group spent £2.8 million (about $4.5 million) to complete the development.