Gagfah SA (GFJ), the third-biggest owner of German real estate by market value, got a 1.06 billion-euro ($1.4 billion) loan from Bank of America Corp. to refinance some of its 3.4 billion euros of debt due this year.
Gagfah, controlled by Fortress Investment Group LLC (FIG), used the funding to pay back 1.04 billion euros of debt maturing in May, the Luxembourg-based company said in a statement yesterday.
The earlier borrowing was used to buy 38,000 apartments in 2006, held by Gagfah’s Woba unit in Dresden, and was the largest part of two commercial mortgage-backed securities: DECO 14-Pan Europe 5 BV and Windermere IX CMBS (Multifamily) SA, according to data compiled by Bloomberg.
“This is the first of several financings we are planning to close during the first half,” Chief Financial Officer Gerald Klinck said in the statement. “It will help to optimize Gagfah’s capital structure.”
Gagfah has a 2.1 billion-euro loan due in August. That loan was sold to investors as the German Residential Funding Plc CMBS. Fortress is among the private-equity firms facing debt deadlines after buying German real estate with the cheap credit available in the years before the global financial crisis. The New York-based firm owns 66 percent of Gagfah, according to data compiled by Bloomberg.
The new loan matures in five years and will carry a 3.9 percent interest rate, Gagfah said in the statement. That’s 43 basis points lower than the coupon on the previous loan. A basis point is the equivalent of 0.01 percentage point.
Gagfah fell 1 percent to 8.74 euros at 3:50 p.m. in Frankfurt trading. The shares have more than doubled in the past 12 months, making it the second-best performer on Germany’s MDAX index (MDAX) for medium-sized companies, which has risen 24 percent.
The company earlier this month abandoned a plan to sell its Dresden Woba unit after agreeing to take the loan from Bank of America. Refinancing is a better alternative, even though offers for the Woba portfolio were attractive, Chief Executive Officer Stephen Charlton said at the time.
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