Ad Hoc announcement pursuant to article 53 LR
- Redemption of bank mortgages and signing of two unsecured credit facilities
- Significant reduction in ongoing interest costs and increase in financial flexibility
- Refinancing in line with capital management principles and linked to ESG rating
On its Capital Markets Day at the end of October 2021, Swiss Prime Site introduced its capital management principles for the future. The key principles include optimising the mix of equity and borrowed capital, increasing financial flexibility, ensuring homogeneity of financing sources, reducing refinancing risks and minimising financing costs. Building on these principles, yesterday Swiss Prime Site concluded a deal with 11 Swiss banking institutions for two unsecured credit facilities with an amount of CHF 2.6 billion. First, Swiss Prime Site redeems with a volume of CHF 1.8 billion the vast majority of its bank mortgages, which as at 30 June 2021 were mostly secured with real estate. Second, Swiss Prime Site is securing a committed revolving credit facility (RCF) in the amount of CHF 0.8 billion. The two agreements have respective tenors of five and six years and feature three and one extension option, respectively. This development will increase the proportion of properties not secured by mortgages in Swiss Prime Site's entire portfolio from just under 30 percent to more than 80 percent and will ensure that the vast majority of the providers of borrowed capital are treated equally.
Significant reduction in interest costs and increase in financial flexibility
This early redemption of the bank mortgages will affect Swiss Prime Site's 2021 income statement by approximately CHF 24 million. The costs are in line with a significant reduction of the interest hedging expenses contractually incurred over the next few years in any case. By contrast, ongoing interest costs of the redeemed mortgages will see a reduction of approximately 50 percent, or CHF 10 to 12 million per year. Moreover, there will be a significant extension of the weighted term to maturity. Marcel Kucher, CFO of Swiss Prime Site, says: «We are very pleased that we have been able to efficiently implement this strategic financing decision with our banks. Not only will there be significant savings in ongoing interest costs, but we are also improving our financial agility and making our balance sheet considerably more flexible.»
Refinancing in line with capital management principles and linked to ESG rating
Swiss Prime Site's move represents a significant first step towards implementing the capital management principles introduced on its Capital Markets Day 2021. The concrete objectives are an LTV ratio (based on total debt/total assets) of less than 40 percent (previously 45 percent), an interest coverage ratio of above than seven (7x) and an unencumbered asset ratio of greater than 80 percent. Swiss Prime Site expects that these objectives will be achieved by 2022 thanks to the recently implemented adjustment and its focused capital recycling strategy. The banks involved also support the strategy and have agreed to reduce interest margins when the targets have been achieved. Furthermore, the new financing approach is also directly linked to Swiss Prime Site's comprehensive sustainability objectives. The credit margin to be paid is dependent on both the LTV ratio and the development of the company's external ISS ESG rating. This enables Swiss Prime Site to further integrate financial and non-financial performance, building on the green bonds already issued. «Through this significant optimisation of our capital structure, we increase our comparability with European and global competitors. In the medium term, this should also lead to an improvement in our credit rating», adds René Zahnd, CEO of Swiss Prime Site.