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Plymouth Increases Credit Facility, Lowers Cost of Debt

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Zacks Equity Research
·4 min read
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Enhancing its capital structure flexibility, Plymouth Industrial REIT, Inc. PLYM entered a $300-million unsecured credit facility, consisting of a revolving credit facility of $200 million and a term loan of $100 million. With this, the company expanded its line capacity and reduced borrowing costs.

Specifically, it expanded its credit facility and extended debt maturities as the new unsecured credit facility, maturing in October 2024, replaces the existing $100-million secured facility that was scheduled to mature in August 2023. The maturity of the new facility can be extended by an additional year by using two six-month extension options.

Moreover, the new unsecured term loan matures in October 2025 and replaces the old $100-million secured term loan that was due later this month.

Subject to certain conditions, the company can further increase its borrowing up to $500 million by exercising an accordion feature in the new unsecured revolving credit facility. Interest rate on the borrowing under the facility and the term loan will be LIBOR (at a floor of 0.30%) plus a margin between 145-200 basis points (bps), depending on the company’s leverage. Earlier, the borrowings were charged at a margin between 200-250 bps. Hence, the new debt enables it to reduce its borrowing costs.

Per management, “With this earlier-than-anticipated move to an unsecured credit facility and term loan, we have significantly extended our maturities and provided a more efficient means to support our continued growth.”

In fact, at the closing of the unsecured debt, Plymouth used $81 million of the new $100-million term loan to fully repay outstanding amount under the old term loan. Remaining balance of the new term loan has been allocated to working capital and future buyouts.

Notably, the new unsecured debt enabled the company to improve its balance sheet, given the access to debt and equity markets. Additionally, its efforts to tap the debt market amid the low rate environment and in such testing times are a strategic fit. Furthermore, the new debt will result in lower funding costs, since unsecured notes can now be borrowed at lower rates. Hence, it will likely reduce interest expenses in the upcoming period.

However, vacancies at its properties and higher near-term lease expirations are concerning for the company as amid the challenges brought forth by the pandemic, it may be difficult for Plymouth to backfill the vacated space. This is likely to result in rent loss and may hinder top-line growth.

Shares of this Zacks Rank#5 (Strong Sell) have gained 4.9% over the past six months compared with the industry’s growth of 8.8%.


Stocks to Consider

Sabra Healthcare REIT, Inc.’s SBRA funds from operations (FFO) per share estimates for 2020 have been revised marginally upward to $1.75 over the past month. The company carries a Zacks Rank of 2 (Buy), currently. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

City Office REIT, Inc.’s CIO Zacks Consensus Estimate for 2020 FFO per share has remained unrevised at $1.14 over the past month. The company currently carries a Zacks Rank of 2.

American Tower Corporation’s AMT Zacks Consensus Estimate for 2020 FFO per share has remained unchanged at $8.28 in a months’ time. The company has a Zacks Rank of 2, at present.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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American Tower Corporation REIT (AMT) : Free Stock Analysis Report
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PLYMOUTH IND RE (PLYM) : Free Stock Analysis Report
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