DDR Corp. (DDR - Free Report) announced that it has refinanced two of its revolving credit facilities in a bid to increase the company’s borrowing capacity to $1 billion and stretch the maturities of their debts.
The company upsized its $750 million unsecured revolving credit facility to $950 million. The revised loan is slated to mature on Sep 1, 2021, and carries two six-month extension options. An accordion feature, which can potentially increase the total debt capacity to $1.45 billion, is also attached to the credit facility.
Fulfilling the financial covenant of the $950 million unsecured revolving credit facility, DDR also refinanced its PNC Bank, National Association loan — a $50-million unsecured revolving credit facility. However, as per DDR’s credit rating, the pricing of this amended credit facility remains unchanged.
The company also revised the terms of its $200 million unsecured term loan — part of the existing $400 million loan. It extended the maturity of the recast portion of the loan, stretching payments to Jan 31, 2023. The remaining part of the credit facility, slated to mature on Jan 20, 2018, comes with two one-year extension options. The rate of the term loan remains unchanged at LIBOR plus 110 basis points.
Nonetheless, the company intends to repay the 2018 maturity loan as part of its deleveraging strategy.
Per management, these refinancing initiatives have enabled the company to achieve the longest weighted average debt maturity in the shopping center real estate investment trust (REIT) sector. Moreover, the accrued credit facility will help the company comfortably meet its debt obligations maturing over the next four years.
Notably, DDR continues to focus on its strategic priorities, such as restructuring the company’s balance sheet. In line with this, it anticipates to complete the deleveraging process by mid-2018. The restructuring is aimed at raising efficiencies and improving liquidity. The refinancing activities will provide the company greater financial flexibility and complement its deleveraging process.
The inflated credit facility will help the company pursue expansion plans in the near future. This, along with the company’s robust operating platform and efficient management team, should help it execute strategic priorities, and drive net asset value and dividend growth.
However, due to the choppy environment in the retail real estate market, shares of DDR have underperformed the industry it belongs to, year to date. The company’s shares have plunged 35.4%, while the industry incurred loss of 5.1%, during this time period.
DDR currently carries a Zacks Rank #3 (Hold). The Zacks Consensus Estimate for funds from operation (FFO) per share estimates for third-quarter 2017 and 2017 remained unchanged at 27 cents and $1.13, respectively, over the past month.
Stocks to Consider
Better-ranked stocks in the REIT space include Regency Centers Corporation (REG - Free Report) , Seritage Growth Properties (SRG - Free Report) and Communications Sales & Leasing, Inc. (UNIT - Free Report) . All three stocks carry a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Regency’s FFO per share estimates for 2017 inched up 0.3% to $3.66 in a month’s time.
Seritage’s FFO per share estimates for 2017 inched up 0.5% to $2.01 over the past 60 days.
Communications Sales & Leasing’s 2017 FFO per share estimates climbed 14.4% to $2.54 over the same time period.
Note: All EPS numbers presented in this write up represent funds from operations (“FFO”) per share. FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.
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