Sovran Self Storage Inc., a real estate investment trust which operates the Uncle Bobs Self Storage brand, has made financing arrangements for $500 million of senior, unsecured debt. As part of the arrangement, the bank-lending syndicate has committed $100 million for a delayed draw note to provide funding for the companys repayment of term notes maturing this September. The new financing will be for seven years and is unsecured, company officials said.
Sovran also negotiated extensions and rate reductions on two other outstanding notes. The maturity dates on the companys $125 million and $100 million unsecured bank group term notes have been extended to June 2020, and the interest rate on both notes has been reduced from Libor plus 2 percent to Libor plus 1.65 percent.
The companys $175 million revolving credit facility has also been extended through June 2018, and its interest rate has been reduced from Libor plus 2 percent to Libor plus 1.5 percent. The new agreement provides for a $75 million increase to the credit facility, at the companys option, and extension options for two additional years.
This financing package extends our debt maturity dates, reduces our effective borrowing costs, and provides us with the capacity and flexibility we need to grow our business, said Andrew J. Gregoire, chief financial officer. Were appreciative of the support that our bank group has shown us.
M&T Bank was the lead arranger and book runner in the transactions. SunTrust Bank and Wells Fargo Bank N.A. served as co-syndication agents. HSBC Bank USA N.A., PNC Bank N.A. and U.S. Bank N.A. each served as co-documentation agents. A total of 11 lenders participated in the syndication.
Sovran also announced it has entered into interest-rate swap contracts that will effectively fix the interest rate on the $100 million delayed draw term note at 3.02 percent for five years, beginning on Sept. 4, 2013. Full-year interest expense savings are expected to be about $4.1 million due to this transaction, company officials said.
The company has increased its projection of funds from operations for the year ended Dec. 31, 2013 from $3.59 to $3.63 per share, with most of the benefit of the refinancing impacting the fourth quarter, officials said.
Sovran operates 471 self-storage facilities in 25 states, with a large presence in Texas.