CubeSmart (CUBE), a real estate investment trust (:REIT), announced amendments to its credit facility and term loan agreements worth $800 million. The move is expected to enable the company to reduce borrowing costs and extend its debt maturity.
CubeSmart amended about $200 million in senior unsecured term loan facility. The term loan facility consisted of two term loans of $100 million each. The maturity date of the “Term Loan A”, a 5-year loan, was extended to Jun 2018 from Jun 2016. However, the maturity date of the “Term Loan B” remained unchanged. Moreover, CubeSmart’s move enabled it to reduce the interest rate of “Term Loan A” by 35 basis points to LIBOR plus 150 basis points.
Additionally, CubeSmart amended about $600 million worth of senior unsecured credit facility. The credit facility consisted of “Term Loan C” worth $100 million, “Term Loan D” worth $200 million and a revolving credit worth $300 million. “Term Loan C’, due to mature in Dec 2014, remained unchanged. However, the maturity date of ‘Term Loan D” was extended to Jan 2019 from Mar 2017 and that of revolving credit was revised to Jun 2017 from Dec 2015, with a 1-year extension option.
Furthermore, CubeSmart’s move enabled it to reduce the interest rate of credit facility by 25 basis points each to LIBOR plus 150 basis points for both “Term Loan C” and “Term Loan D”. The interest rate of revolving credit was reduced by 20 basis points to 160 basis points.
However, CubeSmart did not foray into any new hedging arrangements along with the amended facilities. Therefore, the company's existing hedging arrangements stand as before.
CubeSmart’s move to amend its credit facility and term loan agreement is a strategic fit. Also, this move is expected to aid the company continue with its portfolio repositioning activity.
Some other firms that have recently amended credit facility and term loan agreements include UDR, Inc. (UDR) and Diamondrock Hospitality Co. (DRH).
UDR recently amended and re-priced its revolving credit facility worth $900 million and term loans worth $350 million, respectively. On the other hand, in Nov 2012, DiamondRock Hospitality amended its $200 million senior unsecured credit facility, which will enable the company to reduce borrowing costs and extend its debt maturity.
CubeSmart currently carries a Zacks Rank #2 (Buy). CommonWealth REIT (CWH) is also worth a look with a Zacks Rank #1 (Strong Buy).
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