Prime Retail restructuring $260 million in financing Loan should cut interest after one-time charge

Commercial real estate

June 07, 1996|By Kevin L. McQuaid | Kevin L. McQuaid,SUN STAFF

Prime Retail Inc. announced yesterday that it has received a $260 million loan commitment from Nomura Asset Capital Corp. that will save the company $4 million annually but result in a one-time charge of $10.1 million in the second quarter.

The Baltimore-based real estate investment trust expects to close the loan transaction with Nomura, a division of the world's largest investment house and Prime Retail's biggest lender, next month.

The majority of the first and second mortgage loans, which will be secured by 13 of the company's 17 factory outlet retail centers, are expected to carry an average 7.5 percent interest rate.

The new loans also are expected to save about $4 million annually in interest costs, Prime Retail said.

"We believe that the loan commitment from Nomura will significantly reduce our annual debt cost and enhance our financial flexibility when compared to our present debt facilities and loan commitments," said Michael W. Reschke, Prime Retail's chairman.

But as a result, Prime Retail expects to incur a non-recurring charge of approximately $10.1 million that will be recorded during the three months ending June 30. The charge results from the anticipated termination of the existing Nomura loan commitments and debt repayment penalties.

The proceeds of the new loans will be used to repay all of the existing Prime Retail indebtedness to Nomura, including a $155 million outstanding credit facility and a $97 million mortgage loan that was converted to securities.

Prime Retail also will use the funds to pay transaction costs and for working capital.

Pub Date: 6/07/96

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