Unite Group to place shares to pay down debt, finance growth

The placing, which was announced overnight, was to be executed via an accelerated bookbuilding run by JP Morgan and Numis, and was expected to raise £300.0m in gross proceeds.

The placing and debt repayment were anticipated to be immediately accretive to total accounting returns, with earnings to be boosted as the new development opportunities were delivered, the student accommodation group said.

Management also sounded a confident note on the outlook, telling markets they had "growing visibility" over the 2020/21 academic year with reservations already at 80.0%.

They also expressed confidence in the "strong" outlook for demand in the UK Higher Education space from 2021/22 onwards, helped they said by "significant" demographic growth and "supportive" government policy.

As at 22 June, Unite had £253m of unrestricted cash and access to £100.0m unsecured debt facility.

Unite's intention was to pay down about £207.0m of secured debt sporting a blended coupon of 4.8%, for which it would incur in costs of £27.0m for breaking certain so-called 'swap' agreements.

That would result in annual interest savings of roughly £7.0m while improving the liabilities side of its balance sheet by pushing out the earliest debt maturity to November 2022 and reducing the group's loan-to-value ratio to 32.0%.

Over the medium-term nevertheless, the company retained an LTV target of 35.0%.

The company would also seek to capitalise on the growth opportunities, with three schemes under offer at an expected total development cost of £250.0m in Central London and in prime provincial markets for delivery in 2023/24.

Its push would come at a time when universities were expected to be facing "financial and operational constraints" and market dislocations were expected to create opportunities in key cities.