Eagle Hospitality REIT enters $462.32m interest rate swap

Its overall cost of borrowing will be lowered to 3.41% per annum representing $1.84m in annual savings.

Eagle Hospitality Real Estate investment trust (EH-REIT) has entered into a $462.32m (US$341m) interest rate swap agreement with Bank of the West in the US, a filing with the Singapore Exchange (SGX) revealed.

The interest rate swap transactions comprise $181.22m (US$133.67m) with a three-year tenure, $140.55m (US$103.67m) with a four-year tenure and $140.55m (US$103.67m) with a five-year tenure. The percentage of the floating debt hedged is 90.7%.

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Following the interest rate swap, the overall cost of borrowing will be lowered to 3.41% per annum from 3.69% per annum, representing savings of $1.84m (US$1.36m) per annum.

“The $462.32m (US$341m) of interest rate swap transactions represent 67.2% of Eagle Hospitality Trust’s (EHT) borrowings. This will be effective 1 July,” Eagle Hospitality REIT Management noted.

The transaction is said to be in line with the REIT Manager’s capital management strategy in connection with the initial public offering (IPO) of EHT, in that it intends to mitigate interest rate volatility on at least 75.0% of its borrowings.

Despite being the largest IPO on the SGX in 2019 to date, EH-REIT’s offering saw less than half of its 580.56 million stapled securities, offered at $1.06 (US$0.78) apiece, subscribed under the public offer. As a result, its joint bookrunners and underwriters took up the bulk of the allotment of unsubscribed securities.