Stockland Lifts Liquidity for Headroom on Debt

The country’s largest listed residential developer Stockland has secured $350 million in unsecured bank facilities following a sharp drop in yields amid growing recession fears.

The ASX-listed company, led by Mark Steinert, as of February held a total available liquidity of $850 million, comprising cash and committed undrawn bank debt facilities.

The injection, along with an issue of $180 million in 10-year, Euro medium-term notes, will lift its available liquidity to $1.3 billion.

The marginal cost of the new debt is below Stockland's weighted average cost of debt.

“The group has a strong balance sheet, with gearing within target range, and we continue to maintain significant headroom in financial covenants,” Stockland said in a statement to the ASX.

The loans will also underpin Stockland's balance sheet while it reins in settlements across its residential portfolio.

Ratings agency Moody’s holds its outlook on Stockland with a rating of stable, on the back of the renewed credit measures.

The combination of an additional liquidity, as well as the group's access to short and long term debt markets and disciplined cash management, will now aim to protect it during the current market disruption and into a recovery phase.

The deteriorating macroeconomic environment and uncertainty surrounding the implications of the coronavirus pandemic has forced property companies across the country to take narrower outlooks and rein in settlements.

Last month, Stockland withdrew its full-year guidance as uncertainty surrounding the impact of the virus ravaged property stocks.

Stockland was banking on a second-half skew after its funds from operations, an industry measure of profit, fell 5.6 per cent in the six months to December.

Following the recent housing downturn, Stockland pointed to a lack of bank credit for a sharp spike in defaults on home settlements and the worst residential sales conditions in three decades.

At the time, Steinert said the single most important factor affecting the company’s residential sales had been the lack of bank credit.

Stockland, which also holds a large network of shopping centres, had been in the process of divesting a number of weakening sub-regional and medium-sized centres in order to focus on larger shopping centres.

The company's development pipeline now totals over $2.5 billion but current conditions haven't dampened its appetite for new product.

Stockland last month acquired the undeveloped portion of The Gables, a 293-hectare masterplanned residential community in Sydney’s Box Hill for $415 million.