PAYCE reported NPAT of $121m for 1H15 following the sale of the Hurstville, East Village and Platinum properties/projects in the half year
Which is in line with expectations set out in our last update on 20 January PAYCE update – East Village site visit and share buy-back
The results also confirmed that the East Village retail and commercial rental assets were valued at $235m in the recent refinance process, slightly higher than our previous estimate of $230m and that new investment loan is for a seven year term.
Investors may recall that PAYCE cannot leverage East Village by more than 70% of its value (including the $50m bond issue) until December 2016 and 60% thereafter. Using the valuation of $235m, that would limit the senior secured investment loan to $114.5m until December 2016 and $91m thereafter, providing significant residual value to support the bonds (i.e. $114.5m bank debt plus $50m bonds or $235m value which is equal to 70% and, $91m bank debt plus $50m bonds or $235m value which is equal to 60%). This would equate to a senior secured debt loan to value ratio (LVR) of 48.7% until December 2016 and 38.7% after that date, assuming the valuation remains constant at $235m.
The bonds have a maturity date of 3 December 2018 but are able to be called early at $102 in December 2016 or $101 in December 2017. Assuming current financial conditions remain steady over the next two years (particularly interest rates and credit margins), PAYCE would likely be able to refinance East Village at a substantially lower cost than the bonds (9.5% coupon) even taking into account the 2% premium payout for early call.
Bonds are indicatively offered at a yield to call (December 2016) of 4.32% for retail and wholesale investors (pricing accurate at time of writing).
For more information, see the article PAYCE update – East Village site visit and share buy-back.