Ventas Inc. (VTR - Analyst Report), a premier healthcare real estate investment trust (REIT), has recently obtained a new four-year unsecured revolving credit facility worth $2 billion to replace its existing $1 billion credit facility that was scheduled to mature in April 2012.
The new credit facility bears an interest rate at 125 basis points over LIBOR, while the previous credit facility was priced at 280 basis points over LIBOR.
The new credit facility is scheduled to mature in October 2015 and has an accordion feature that would enable Ventas 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 $2.5 billion.
The new credit line provides greater financial flexibility to Ventas to address any upcoming debt maturities and increases its liquidity. Furthermore, the new credit facility reduced the interest burden of the company besides increasing its borrowing capacity to enable it to capitalize on favorable investment opportunities.
Ventas is primarily engaged in the business of financing, owning and leasing healthcare related and senior housing facilities. The company has one of the largest and most diversified portfolios in the healthcare sector with exposure to all types of facilities.
The product diversity of the company allows it to capitalize on opportunities in different markets based on individual market dynamics, and provides a hard-to-replicate competitive advantage over its peers.
In addition, healthcare is relatively immune to the economic problems faced by office, retail and apartment companies. Consumers will continue to spend on healthcare while cutting out discretionary purchases.
The healthcare industry is the single largest industry in the U.S. based on Gross Domestic Product (GDP), and an aging Baby Boomer generation’s demand for assisted and independent living facilities should increase in the coming years.
Ventas currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We maintain our long-term Neutral recommendation on the stock. We also have a Neutral recommendation and a Zacks #3 Rank for HCP, Inc. (HCP - Analyst Report), one of the competitors of Ventas.