In a constrained debt capital market, Equites Property Fund has raised R500m in public auction of a five-year listed senior unsecured floating rate note in SA.
The company attracted R1.23bn bids from 13 investors at an auction conducted by Standard Bank.
Warren Douglas, treasurer and head of risk management at Equites, said the note’s clearing margin of 138 basis points above the three-month Johannesburg interbank average rate (Jibar) is one basis point lower than that achieved in the last public auction in September of 139 basis points.
Douglas said Equites has a diverse book of 28 fixed income investors in its listed debt notes.
On November 8, Equites raised R200m in a private placement at a margin of 125 basis points over the three-month Jibar, four basis points lower than the level achieved in the September auction.
Equites will use the funds raised to pay down existing debt, lower the cost of debt, and, together with asset disposal proceeds, reduce the loan-to-value ratio, Douglas said.
For the six months results for the period ended August, the group had R14.5bn in debt facilities with a weighted average debt maturity profile of 3.3 years. Equites had 84% of debt maturing within one year. Its adjusted loan-to-value which includes property disposals contracted but expected to complete post-period-end sat at 38.1% and the group targets reducing this to 35% by February 2024.
The company said net finance costs increased by 170% as the loans and borrowings increased from R11.2bn to R12.5bn to fund portfolio growth, along with an increase in funding rates. The cost of SA debt was 86 basis points above the three-month Jibar with the UK cost of debt sitting at 87 basis points below the sterling overnight index average.
Equites is the specialist owner and developer of prime logistics assets in SA and the UK. Its tenants are multinationals that are prepared to sign leases for 10, 15 and 20 years and who, given their commercial might, tend to meet rental payments on time.
On September 5, Equites raised R750m, of which R300m was issued in a 2.75-year note at a 129 basis points margin and R450m in a 4.75-year note at a 139 basis points margin. This auction attracted R2.45bn of bids from 16 investors, resulting in a book that was 3.3 times oversubscribed.
Douglas said as a regular issuer in debt markets it is encouraging to see a diverse range of SA investors showing support for the fund.
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