Apartment Investment and Management Company
(
AIV
), or Aimco as the real estate investment trust (REIT) is popularly
known, has recently obtained a new three-year revolving credit
facility worth $500 million in its concerted effort to strengthen
liquidity and reduce refinancing risk. The new credit facility
replaces the existing $300 million credit facility that was
scheduled to mature in May 2013.
The renewed credit facility is scheduled to mature in December
2014 and has an accordion feature that would enable Aimco to extend
the maturity by two 1-year periods subject to the fulfillment of
certain conditions. Wells Fargo Securities, LLC, part of
Wells Fargo & Company
(
WFC
); and KeyBanc Capital Markets, the investment banking division of
KeyCorp
(
KEY
), were the joint Lead Arrangers and Book Runners for the
transaction.
Besides extending the debt maturity and the borrowing capacity
of Aimco, the new credit facility reduces the capital outflow with
a significantly low interest rate. The new credit facility bears an
interest at LIBOR plus 2.75%, while that of the erstwhile credit
facility was LIBOR plus 4.25%.
However, both the credit facilities have similar financial
covenants, with debt service coverage covenant at 1.40x and fixed
charge coverage covenant at 1.20x. Aimco intends to utilize the
increased fund-flow from the new credit facility to secure
corporate letters of credit and meet its short-term working capital
requirements.
Aimco has historically maintained a conservative balance sheet
and pursued a strategy of financial flexibility that enables the
payment of steady dividends to its shareholders. The new credit
facility also optimizes the borrowing capacity of the company in
accordance with its current capital plan.
One of the largest owners and operators of multifamily
apartments in the U.S., Aimco has a diversified portfolio of
conventional, affordable and student housing communities. The
company has a strong portfolio of Class 'B' and Class 'C'
properties primarily catering to the middle-income market.
However, despite attempts to reposition its portfolio in higher
growth markets, much of the company's portfolio still resides in
areas where housing is relatively cheap. As the company continues
to sell non-core assets and buy in high-growth infill areas, we
expect continued earnings dilution.
We maintain our long-term 'Neutral' rating on Aimco, which
currently has a Zacks #3 Rank that translates into a short-term
'Hold' rating, indicating that the stock is expected to perform in
line with the overall U.S. equity market for the next 1-3
months.
APARTMENT INVT (
AIV
): Free Stock Analysis Report
KEYCORP NEW (
KEY
): Free Stock Analysis Report
WELLS FARGO-NEW (
WFC
): Free Stock Analysis Report
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