Santander Entity Refinances Less Mess Debt
Less Mess Storage announced it successfully refinanced the majority of its debt, 8,500,000 euros, through Bank Zachodini WBK S.A., part of the Santander Group.
Prior to closing the refinancing, the company carried bonds and vendor financing, used for the purchase of its self-storage assets on April 28, 2014, in amounts of 3.5 million and 7 million euros, respectively. The annual interest cost on the bonds was 18%, and the vendor financing had an interest rate of just below 4%.
Under the terms of the new facility agreement with WBK (the facility), 3.5 million euros was used to redeem all the bonds and 5 million euros was used to pay down the vendor financing, leaving 2 million euros of vendor financing remaining. The interest cost on the Facility, which is split into two equal tranches, one the PLN equivalent of 4.25 million euros and the other the CZK equivalent of 4.25 million euros, is 3-month WIBOR and 3-month PRIBOR, respectively, plus a margin of 2.85%. 75% of each tranche is subject to a 5-year interest rate swap transaction resulting in blended fixed interest cost to the company of 4.43%, and the 25% floating portions of each tranche currently have a blended cost of 4.04%. The remaining 2 million euros tranche of vendor financing currently costs 3.8%, and is capped at 5%.
The term is five years, with amortization of principal over 25 years or 4% a year.
In addition to the 8.5 million euros drawn down on closing, the facility commits WBK, but with no commitment fees payable by the company, to provide a further 2 million euros of senior debt financing if the company can raise at least 5 million euros in financing, either as equity or subordinated debt, by December 31, 2015.
If the company does not raise the equivalent of an additional 5 million euros by December 31, 2015, a cash sweep will be triggered, which in essence allocates most of the company’s free cash flow generated after December 31, 2015 towards repayment of principal.
The bank’s security package is typical for such senior debt financing’s, including first charge mortgages on the company’s four freehold properties, with the remaining vendor financing moved to second place.
Guy Pinsent, CEO for Less Mess, commented, “We are delighted to have the backing of WBK, the third largest bank in Poland and, via its parent Santander Group, one of the strongest banks globally. This long term financing, the first time a bank has invested in self-storage in Poland and the Czech Republic, is excellent news for the company, and speaks volumes about the positive economic environment in Poland and the Czech Republic. In replacing the bonds bridge financing we have halved our weighted average cost of debt to 4.2%. We have also hedged our exposure to interest rate fluctuations by concluding 5-year interest rate swap transactions for 75% of the bank financing, effectively fixing most of our interest cost at the current low rates. Our bottom line is expected to improve significantly, and the company now has a stronger balance sheet from which to expand.”
Less Mess Storage owns and operates a self-storage chain in Central and Eastern Europe.