Palace Capital plc, the property investment company that focuses on commercial property predominantly outside London, announces that it has entered into further hedging facilities totalling £55.8 million in order to mitigate future interest rate risk.
The Company has now executed swaps for approximately 70 per cent. of Group drawn debt facilities, equating to £70.3 million, due to the recent increase in expectations that UK interest rates will rise in the short to medium term. The Board concluded that it was prudent to fix the interest rates on the majority of its debt facilities in order to give the Company protection against higher rates and limit its exposure to movements in LIBOR. As a result, the Group’s average cost of debt, going forward, has increased from 2.9 per cent. to 3.4 per cent.
JC Rathbone Associates Limited (“Rathbone”) provided hedging advice to the Board. The hedging that has been entered into requires a fair value assessment at each of the Company’s future reporting dates and Rathbone will provide this to the Group.
Stephen Silvester, Finance Director, commented: “We have had one of the consistently lowest costs of debt in the sector in recent years. Given the advice from Rathbone and market expectations concerning interest rates, we agreed that locking-in the majority of our debt on fixed rates provides the Company with limited exposure to future interest rate risk whilst maintaining our relative cost of funds position and good headroom with regards to interest cover.”