Simon Property Group Inc. (SPG), a leading real estate investment trust (REIT), has recently obtained a new four-year unsecured revolving credit facility to increase its liquidity. JPMorgan Chase & Co. (JPM) and Bank of America Corporation (BAC) acted as the Joint Lead Arrangers and Joint Bookrunners for the transaction.
The new credit facility worth $4.0 billion bears a base interest rate of 100 basis points over LIBOR. The credit facility is scheduled to mature on October 30, 2015 and has an accordion feature that would enable Simon Property to extend the maturity by an additional year subject to the fulfillment of certain conditions. At the same time, the company can increase the borrowing capacity of the credit facility to $5.0 billion.
To facilitate the international operations of the company, the credit facility also provides for a $2.0 billion multi-currency tranche for Euro, Yen, Sterling, and Canadian Dollar borrowings. Furthermore, the new debt facility provides a money market competitive bid option that would enable Simon Property to hold auctions to achieve lower pricing for short-term borrowings.
The new credit line provides greater financial flexibility to Simon Property to address any upcoming debt maturities and increases its liquidity. By the end of second quarter 2011, the company had a staggering debt burden of approximately $17.0 billion.
Headquartered in Indianapolis, Indiana, Simon Property is the largest publicly traded retail real estate company in North America, engaged in acquiring, owning and leasing a diverse portfolio of shopping malls. The company’s international presence gives it a more sustainable long-term growth story than its domestically focused peers. The geographic and product diversity of the company insulates it from market volatility and provides a steady source of income.
We currently have a ‘Neutral’ recommendation on Simon Property, which presently has a Zacks #3 Rank that translates into a short-term ‘Hold’ rating.
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