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Financing Solution for ApexHi

Posted On Monday, 21 May 2007 02:00 Published by eProp Commercial Property News
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ApexHi has re-fixed its existing fixed term loans, extended its debt capital market finance arrangement (conduit funding) with Standard Bank by a further R500-million, and renegotiated its costs and margins on its conventional funding, which will save the company some R7,5-million per annum in finance charges.

Gerald LeissnerApexHi Financial Director, Colette van Wyk, says despite the fact that interest rates have not come down, changing market conditions have resulted in the ability to renegotiate longer term fixes at lower rates with reduced unwind costs.

“Recently, the yield curve pivoted, which means that rates at the shorter end (one to two years) increased and the longer end (10 years) decreased by a significant 20 basis points. When rates rise, the cost to unwind goes down so ApexHi (assisted by Treasury Resources) has been able to negotiate lower unwind costs and lock into longer term fixes at lower rates. This engineering has resulted in savings of R3,6-million per annum,” says van Wyk.

ApexHi has introduced additional conduit funding of R500-million which increases its total conduit funding to R1,195-billion (75%) of its R1,6-billion total debt, at a weighted average interest rate of 9,51%. The additional conduit funding has resulted in savings of R3,3-million per annum. A further R170,2-million is fixed by means of conventional funding, and  margins and costs were renegotiated on these borrowings which resulted in savings of R600,000 per annum.

Standard Bank’s debt capital market funding arrangement – or conduit funding - entails the use of existing funding infrastructures through which commercial paper is issued directly into the capital markets against the security of the portfolio of assets.

“In essence a loan that has a senior claim to the property portfolio is provided to ApexHi without the necessity to transfer properties into a separate special purpose vehicle. The result is a flexible funding arrangement that unlocks the value in the ApexHi property portfolio without incurring high structuring fees,” says van Wyk.

The fixed portion of debt amounts 82% of total borrowings at an all in rate of 9,69%, reduced from 10,24% in December 2006, with an average length of all fixes just under 10 years.

“The strategic restructuring of debt and subsequent reduced finance costs will benefit ApexHi unit holders, and should contribute 2.7 cents per unit to future distributions,” says van Wyk.

Last modified on Thursday, 24 April 2014 15:25

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