MedicX Fund £264.5m refinancing
MedicX, the specialist primary care infrastructure investor in modern purpose-built primary healthcare properties in the United Kingdom and Republic of Ireland, is delighted to announce that it has successfully refinanced £233.7 million of existing Aviva loan facilities, as well as increasing the loan facility by a further £30.8 million.
MedicX benefits from resetting the Loan to Value (“LTV”) covenant on the legacy restructured debt portfolio to 65%, thereby enabling the release of c.£72 million of charged property collateral, c.£47 million of which has been applied to increase the loan facility. The remaining c.£25 million includes eight selected properties that have been released from charge, providing flexibility to undertake asset management projects identified at those locations as well as increasing unencumbered collateral to negotiate future facilities at current market rates. Lastly, the refinancing enables MedicX to take the opportunity to rationalise part of its group structure which will see improved efficiency through the elimination of six non-trading subsidiaries which no longer own investment property.
The refinancing, which was conducted without incurring break fees on the refinanced loan facilities, combined forty six tranches across twenty legacy loan agreements, into two tranches under one new loan agreement.
The new loan facility consists of a new £30.8 million 10 year interest only tranche with a fixed interest rate of 3.05% per annum, together with a £233.7 million 15 year partially amortising tranche with a fixed interest rate of 4.69% per annum (equal to the blended current cost of the existing facilities). Amortisation of £40 million will be spread over the 15 year term of the £233.7 million tranche, with the remaining £193.7 million repayable at maturity.
The new facility agreement standardises the covenants that will apply to the new facility. These will require the Group to operate with a debt service cover ratio of at least 140% throughout and with an LTV of no more than 75% for the first five years, falling to 70% for years six to ten and then 65% for the remaining term. The facilities will be fully drawn immediately, with the net proceeds from the new £30.8 million tranche used in the first instance to repay the £20 million drawn RBS Revolving Credit Facility (“RCF”), with the excess held as cash until deployed into investment properties either under construction or forming part of the Company’s acquisition pipeline.
Following the refinancing, the Group’s adjusted gearing (the ratio of total debt to total assets, in each case net of cash) will increase marginally to 53.3% (June 2018: 52.5%) and the weighted average unexpired term of debt will increase from 11.0 to 11.7 years. The Group’s weighted average cost of debt remains almost unchanged at 4.26%, from 4.25% at 30 June 2018.
Helen Mahy, Chairman, said “We are delighted to have agreed a refinancing with our long-term funding partner Aviva Investors. The new arrangements will improve operational efficiency and free up property collateral, enabling MedicX to undertake identified asset management projects and negotiate new facilities at competitive rates which should reduce MedicX’s average cost of debt”.