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Agree Realty Amends Unsecured Term Loans Aggerating $100M

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Agree Realty Corporation (ADC - Free Report) has entered into a pricing amendment on Dec 17, to reduce interest burden on two unsecured term loans worth $65 million and $35 million.

Particularly, the recast offers a new pricing grid above LIBOR on the term loans maturing on Jan 15, 2024. The interest rate on the borrowings will be reduced to a fixed rate of 3.13%, from a previous rate of 3.78%. Notably, the restatement has been determined by the company’s credit rating.

Further, as the company continues to assess opportunities for interest savings, on Nov 2, 2018, it entered into another pricing amendment for a $40-million unsecured term loan maturing on Jul 1, 2023. Consequently, interest rate was brought down to a fixed rate of 2.40% as compared to a previous rate of 3.05%.

Understandably, these efforts provide a cheaper line of credit to the company and help reduce annualized interest expense. It will also boost Agree Realty’scash flow and alleviate its bottom-line pressure.

Per management, the amendment will enable the company to maintain a conservative balance sheet, with long-term, fixed-rate borrowings. In fact, such moves are strategic fit in the prevailing rising interest rate scenario.

In fact, short-term interest rate hikes have occurred for three consecutive quarters in 2018, and there is a high probability of another hike in December. This is a concern for Agree Realty as it would restrict the company’s ability to refinance existing debt, while the interest cost on new debt would go up. This, in turn, might adversely impact the company’s financial results and dent its ability to hike dividend.

Agree Realty currently carries a Zacks Rank #3 (Hold). In the past three months, shares of the company have outperformed the industry. While the stock has gained 9.2%, the industry has incurred a loss of 7.6% during this period.


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