Safestay PLC £18.4m Refinancing and £12.6m Sale and Leaseback (0977B)

TIDMSSTY

RNS Number : 0977B

Safestay PLC

31 March 2017

The information contained within this announcement is deemed by the Group to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ("MAR").

31 March 2017

Safestay plc

("Safestay", the "Company" or the "Group")

Announces GBP18.4 million debt restructuring and refinancing

and raising GBP12.6 million of new capital

through sale and leaseback agreements

Debt restructuring and refinancing

Safestay (AIM: SSTY), the owner and operator of a new brand of contemporary hostel, is pleased to announce it has agreed an GBP18.4 million debt restructuring and refinancing. This will replace the existing convertible and bank debt with a single banking facility with HSBC.

As at 31 December 2016, the Company had unaudited total borrowings of GBP17.6 million, made up of a GBP13.8 million bank facility and convertible loans of GBP3.8 million with an average cost of debt of 3.7%. A new GBP18.4 million, 5 year bank facility has been agreed with HSBC, subject to satisfaction of customary conditions, to replace prior arrangements. The net effect of this will be to significantly reduce cost of debt and repay all outstanding convertible loans when they become due.

New sale and leaseback arrangement

Safestay is also pleased to announce that it has completed sale and leaseback transactions on its hostels in Edinburgh and Elephant & Castle raising gross cash proceeds of GBP12.6 million. The sale has been agreed with an institutional buyer in exchange for 150 year geared ground rent leases. This provides the opportunity for Safestay to continue to operate both hostels under long term ownership whilst releasing the cash from the two properties, providing a materially positive impact for the Group, without the liability of open market rents.

Safestay will receive GBP5.32 million for Edinburgh and GBP6.1 million for Elephant & Castle and a further GBP1.18 million on completion of the proposed extension of the Elephant & Castle hostel, expected in 2018. Total gross proceeds from the sale and leaseback are GBP12.6 million against annual combined ground rents commencing at GBP0.30 million rising to GBP0.33 million on completion of the extension, representing a net initial yield of 2.46%.

In the year to 31 December 2016, the two hostels generated unaudited revenues of GBP5.5 million and a profit before tax of GBP1.5 million.

The newly created leaseholds for both properties were independently valued on 14 March 2017 at GBP30.3 million, which compares favourably with the freehold valuation of GBP30.8 million on 31 December 2016. On this basis, the sale and leaseback transaction will not materially affect the book value of the property portfolio and it is noteworthy that the GBP12.6 million being realised equates to a net asset increase of 37p per share.

Commenting on the refinancing and the sale and leaseback transactions, Larry Lipman, Group Chairman, said:

"Consolidating our borrowings into one new facility at a lower cost with an international lender capable of supporting our European ambitions is a logical and very positive step and has been made possible by the increasing trading strength of the business.

The underlying uplift in value for the Edinburgh and Elephant & Castle sites is excellent for the business and the transactions this has enabled reflect well on the strength of our business, our brand and the quality of our properties and means we can re-cycle capital into new growth opportunities where we can continue to achieve higher and therefore more attractive returns."

- ENDS -

Enquiries

 
                                    [phone] 
 Safestay plc                        1600 
 Larry Lipman, Chairman 
 
 Canaccord Genuity Limited          [phone] 
  (Nominated Adviser and Broker)     8000 
 Bruce Garrow 
 Chris Connors 
  Ben Griffiths 
 
 Novella 
                                    [phone] 
 Tim Robertson                       7008 
 Toby Andrews 
 

For more information visit: www.safestay.com

This information is provided by RNS

The company news service from the London Stock Exchange

END

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March 31, 2017 02:01 ET (06:01 GMT)