Embassy Office Parks REIT or Embassy REIT, the first listed Real Estate Investment Trust (REIT) in India, announced the debt raise of Rs 1,050 crore through non-convertible debentures (NCDs) on Monday.
The purpose of this fundraise is to refinance bank loans that are due for an interest reset in the coming months. By opting for this refinancing at a 7.77 per cent coupon, Embassy REIT expects to secure significant interest savings of approximately 138 basis points (bps) compared to the expected interest rate upon repricing.
The NCDs issued by Embassy REIT will be listed on the wholesale debt market of BSE Limited, providing investors with the opportunity to participate in this investment.
The rating agency CRISIL has assigned a ‘AAA/Stable’ rating to these NCDs.
The Debenture Committee of the Board of Directors of the Manager to Embassy REIT approved the issuance of Rs 1,050 crores of Embassy REIT Series VII NCDs. These NCDs have a two-year tenure and offer a 7.77 per cent quarterly coupon rate. The primary objective of this debt raise is to refinance the company's existing bank loans, reduce its interest expenses and optimise its financial performance.
Ritwik Bhattacharjee, Chief Investment Officer at Embassy REIT, in the BSE filing said, “We are pleased to announce the closing of this fundraise of Rs 1,050 crore, which has seen strong participation from institutional investors. Our AAA-rated balance sheet, proactive debt management and industry-leading creditworthiness continues to attract capital from mutual funds, insurers, and corporates. This NCD issuance, priced at 7.77 per cent, enables us to partly refinance floating rate loans prudently, and we will continue to monitor our floating rate debt book to minimise the impact of potential interest rate increases to unitholders.”
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Embassy REIT expects that replacing higher-cost bank loans with lower-cost NCDs may result in substantial interest savings, enhancing the company's profitability. Furthermore, the two-year tenure of the NCDs will provide them with a favorable timeframe for managing financial obligations and cash flows. Finally, the company expects the ‘AAA/Stable’ rating from CRISIL to help ensure investor confidence in the reliability and credibility of these NCDs.
To facilitate this debt raise, Axis Bank Limited, Barclays Bank PLC, and ICICI Bank Limited served as arrangers. Talwar Thakore & Associates provided legal counsel to Embassy REIT, ensuring compliance with regulations and legal requirements.