Real estate services firm CBRE Group Inc. (CBG) revealed that it has amended and restated its senior secured credit agreement so as to refinance the existing credit facilities. The move allowed the company to enhance its financial flexibility and leverage the current low rate environment.
The credit agreement presently offers a five-year $2.6 billion revolving credit facility and a five-year $500 million Tranche A term loan facility. The new revolving credit facility enjoys an initial interest rate of LIBOR+125 basis points (bps) and an initial facility fee of 25 bps, while the new term loan has an initial interest rate of LIBOR+150 bps.
CBRE used the proceeds from the new Tranche A term loan and $125 million of recently-issued senior notes, together with cash, for paying back its debt. That included Tranche A and Tranche B term loans and the residual revolving credit facility balance under its previous credit facility, which had balances of $434.4 million, $211.2 million, and $5 million, respectively, as of Dec 31, 2014.
Moreover, in mid-December, the global credit-rating agency Standard & Poor’s Rating Services (S&P) has upgraded CBRE Group’s corporate rating to Investment Grade (BBB-) with a positive outlook.
The move is a strategic fit, given the fact that it helped the company in limiting its exposure to any future hike in interest rates. We expect CBRE Group to benefit from improvement in leasing, property sales and outsourcing business.
Moreover, with market conditions continuing to improve, opportunistic acquisitions would serve as growth drivers, supplementing the company’s organic growth. At the same time, an enhanced financial flexibility would offer the company scope to ride on the growth trajectory, going forward.
CBRE currently has a Zacks Rank #2 (Buy). Investors interested in the real estate operations may also consider stocks like Jones Lang LaSalle Inc. (JLL), NorthStar Realty Finance Corp. (NRF) and RE/MAX Holdings, Inc. (RMAX). While Jones Lang sports a Zacks Rank #1 (Strong Buy), NorthStar and RE/MAX Holdings hold the same Zacks rank as CBRE.
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