Canadian department store operator Hudson's Bay Co (HBC.TO: Quote) outlined a $1.25 billion refinancing plan on Monday, in a move to reduce debt taken on when it acquired U.S. rival Saks last year.
The retailer said it would take out a 20-year mortgage on the ground portion of its flagship Saks Fifth Avenue store in New York City after an appraiser valued the property at C$4.1 billion ($3.65 billion).
“This mortgage transaction allows us to capitalize on the value of this asset today, but also provides structural flexibility to capture additional value creation in the future,” said HBC Chief Executive Richard Baker.
This transaction is expected to close in early December. In connection with this transaction, lenders Bank of America, N.A., Morgan Stanley Bank, N.A., Goldman Sachs Mortgage Company and The Bank of Nova Scotia, independently commissioned a leading international appraiser to provide appraisals of the land and the building. The independent appraiser valued the entire property at C$4.1 billion (US$3.7 billion) based on the assumption that the entire property is net leased by Saks Fifth Avenue at an estimated current fair market rent.
Transaction Highlights
- Independent appraisal values Saks Fifth Avenue flagship property at C$4.1 billion
- Allows HBC to capitalize on value today while preserving flexibility to realize additional value in the future
- Fixed rate 20-year debt with an expected interest rate of less than 4.40%
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After giving effect to the transaction:
- Weighted-average term to maturity of funded debt extended to 11.5 years;
- Exposure to floating interest rates significantly reduced – only 45% of funded debt will be floating compared with 89% prior to transaction