DDR Ddr Corp.

Developers Diversified Realty Corporation (DDR), a real estate investment trust (REIT), has recently refinanced its existing secured term loan facility worth $550 million with a new $500 million senior secured term loan. At the same time, the company amended its two senior unsecured revolving credit facilities as part of its corporate strategy to reduce its short-term floating rate debt.

While the erstwhile term loan was scheduled to mature in February 2012, the new loan comes with a 39-month tenure with an additional 12-month extension option. The new term loan is presently priced at LIBOR plus 170 basis points based upon the credit ratings of the company, and is backed by 21 institutions including four new participants.

Developers Diversified modified one of the unsecured revolving credit facilities to extend its maturity by two additional years to February 2016. The company further lowered the borrowing capacity of the credit facility from $950 million to $750 million. However, the revised credit facility contains an accordion feature that enables Developers Diversified to increase the borrowing capacity to $1.25 billion under exceptional circumstances. The company also modified its $65 million unsecured revolving credit facility in tune with the amended terms of the larger facility.

Based on the current credit ratings of Developers Diversified, the pricing on both new revolving credit facilities has been reduced to LIBOR plus 165 bps, which is about 110 bps lesser than the previous rate. In addition, the facility fee has been further reduced from 50 bps to 35 bps.

Headquartered in Beachwood, Ohio, Developers Diversified acquires, owns, develops, leases and manages shopping centers and business centers across 41 states in the U.S., along with Puerto Rico and Brazil. By the end of first quarter 2011, Developers Diversified owned and managed 520 retail operating (including joint ventures) and development properties spanning approximately 127 million square feet.

We maintain our ‘Neutral’ recommendation on Developers Diversified for the long term. The company presently has a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating. We also have a ‘Neutral’ recommendation and Zacks #3 Rank for Kimco Realty Corporation (KIM), one of the competitors of Developers Diversified.

 
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