East London property investor O Twelve Estates has renegotiated its banking facilities with Nationwide Building Society.
Shares in O Twelve jumped by 50% to 12p each, which values the company at £14.7m. That is the highest the share price has been for one year.
Net debt was £162m at the end of March 2009 and the value of O Twelve’s property portfolio had fallen from £250m to £174m. The company was in default of its loan to value ratio of 75%.
The facility is being renegotiated. It will still last until December 2014, but it will reduce to £140m at the end of March 2011. The annual interest rate margin over Libor will increase from 0.65% to 1.25%. The interest payments have to be covered at least 1.15 times, increasing to 1.2 times after March 2011.
The loan to value covenant will not be tested until 31 March 2011 – it must not exceed 85% at that point. It needs to reduce to no more than 80% at the end of March 2012 and no more than 75% at the end of March 2013.
The loan to value has to fall to 70% before the cash lock up - rental income in excess of financing costs plus £400,000 a quarter is retained by the banks - is ended.
The arrangement fee is £850,000 and there is a further fee of £5.9m that is payable when the facility is completely repaid.
O Twelve currently has available cash of £1.5m – after the arrangement fee. The current void rate is 10.5% and this could fall to 7% if the agreed deals go ahead.
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