Safestay PLC £18.4m Refinancing and £12.6m Sale and Leaseback (0977B)
March 31 2017 - 2:01AM
UK Regulatory
TIDMSSTY
RNS Number : 0977B
Safestay PLC
31 March 2017
The information contained within this announcement is deemed by
the Group to constitute inside information as stipulated under the
Market Abuse Regulations (EU) No. 596/2014 ("MAR").
31 March 2017
Safestay plc
("Safestay", the "Company" or the "Group")
Announces GBP18.4 million debt restructuring and refinancing
and raising GBP12.6 million of new capital
through sale and leaseback agreements
Debt restructuring and refinancing
Safestay (AIM: SSTY), the owner and operator of a new brand of
contemporary hostel, is pleased to announce it has agreed an
GBP18.4 million debt restructuring and refinancing. This will
replace the existing convertible and bank debt with a single
banking facility with HSBC.
As at 31 December 2016, the Company had unaudited total
borrowings of GBP17.6 million, made up of a GBP13.8 million bank
facility and convertible loans of GBP3.8 million with an average
cost of debt of 3.7%. A new GBP18.4 million, 5 year bank facility
has been agreed with HSBC, subject to satisfaction of customary
conditions, to replace prior arrangements. The net effect of this
will be to significantly reduce cost of debt and repay all
outstanding convertible loans when they become due.
New sale and leaseback arrangement
Safestay is also pleased to announce that it has completed sale
and leaseback transactions on its hostels in Edinburgh and Elephant
& Castle raising gross cash proceeds of GBP12.6 million. The
sale has been agreed with an institutional buyer in exchange for
150 year geared ground rent leases. This provides the opportunity
for Safestay to continue to operate both hostels under long term
ownership whilst releasing the cash from the two properties,
providing a materially positive impact for the Group, without the
liability of open market rents.
Safestay will receive GBP5.32 million for Edinburgh and GBP6.1
million for Elephant & Castle and a further GBP1.18 million on
completion of the proposed extension of the Elephant & Castle
hostel, expected in 2018. Total gross proceeds from the sale and
leaseback are GBP12.6 million against annual combined ground rents
commencing at GBP0.30 million rising to GBP0.33 million on
completion of the extension, representing a net initial yield of
2.46%.
In the year to 31 December 2016, the two hostels generated
unaudited revenues of GBP5.5 million and a profit before tax of
GBP1.5 million.
The newly created leaseholds for both properties were
independently valued on 14 March 2017 at GBP30.3 million, which
compares favourably with the freehold valuation of GBP30.8 million
on 31 December 2016. On this basis, the sale and leaseback
transaction will not materially affect the book value of the
property portfolio and it is noteworthy that the GBP12.6 million
being realised equates to a net asset increase of 37p per
share.
Commenting on the refinancing and the sale and leaseback
transactions, Larry Lipman, Group Chairman, said:
"Consolidating our borrowings into one new facility at a lower
cost with an international lender capable of supporting our
European ambitions is a logical and very positive step and has been
made possible by the increasing trading strength of the
business.
The underlying uplift in value for the Edinburgh and Elephant
& Castle sites is excellent for the business and the
transactions this has enabled reflect well on the strength of our
business, our brand and the quality of our properties and means we
can re-cycle capital into new growth opportunities where we can
continue to achieve higher and therefore more attractive
returns."
- ENDS -
Enquiries
+44 (0) 20 8815
Safestay plc 1600
Larry Lipman, Chairman
Canaccord Genuity Limited +44 (0) 20 7523
(Nominated Adviser and Broker) 8000
Bruce Garrow
Chris Connors
Ben Griffiths
Novella
+44 (0) 20 3151
Tim Robertson 7008
Toby Andrews
For more information visit: www.safestay.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
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