Safestay (SSTY)

 

Safestay notes debt restructure, sale & leaseback

Safestay has agreed an £18.4m debt restructuring and refinancing to replace the existing convertible and bank debt with a single banking facility with HSBC. At Dec. 31, 2016, Safestay had unaudited total borrowings of £17.6m, made up of a £13.8m bank facility and convertible loans of £3.8m with an average cost of debt of 3.7%.

It said a new £18.4m, five-year bank facility had been agreed with HSBC to replace the 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," said Safestay in a statement.

SALE & LEASEBACK

Safestay also said it had completed sale and leaseback transactions on its hostels in Edinburgh and Elephant & Castle, raising gross cash proceeds of £12.6m.

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 said it would receive £5.32m for Edinburgh and £6.1m for Elephant & Castle, and a further £1.18m on completion of the proposed extension of the Elephant & Castle hostel, expected in 2018.

Total gross proceeds from the sale and leaseback were £12.6m against annual combined ground rents commencing at £0.30m rising to £0.33m on completion of the extension, representing a net initial yield of 2.46%.

The company added that the sale and leaseback transaction would not materially affect the book value of the property portfolio and it was noteworthy that the £12.6 million being realised equated to a net asset increase of 37p a share.