The new bonds mature on 31 January 2024 and 31 May 2027, pay a coupon of 1.50% and 2.25% and were priced at spreads over reference mid-swaps of 110 bps and 145 bps respectively, thereby extending Global Switch’s average debt maturity and reducing its cost of debt. The combined issuance was more than 3.4 times oversubscribed.
The bonds have been rated BBB+ by Fitch, Baa2 by Moody’s and BBB by Standard & Poor’s, each in line with the corporate rating assigned by each credit rating agency. Post the issues, leverage remains at moderate levels compared with global rated peers and other real estate companies.
The bond launch follows:
· the successful introduction, on 21 December 2016, of a new strategic investor, representing a consortium of Chinese financial and institutional investors, which have already and will continue to support the expansion of Global Switch, in particular by accessing fast growing Chinese telecommunications and internet provider customers looking to expand outside of China;
· the recent announcement of game-changing partnership and co-operation agreements with Huawei, China Telecom Global and Daily-Tech, to support our global expansion plans;
· the signing, in February 2017, of a new ?425 million revolving credit facility on highly attractive terms.
Global Switch’s continued access to long-term and low cost capital market financing, together with the diversification in its shareholder equity funding, will support the company's measured expansion. New data centre developments, supported by strong levels of pre-commitment from customers, will be delivered both in existing locations and in new tier 1 markets to take advantage of the growth in demand from hyperscale customers and customers from China expanding into Europe and South Asia as part of China's Belt and Road initiative.
Global Switch has a clearly defined organic development strategy, which covers eight planned data centre developments, with two in new markets: Hong Kong and Shanghai. Three of the new developments – in Hong Kong, Sydney and Singapore – are under construction, with the first stage of Hong Kong and second stage of Sydney East scheduled for completion and income generation during Q3 2017.
Since its debut bond issuance in 2011, the company has demonstrated consistent ratings improvement driven by stable operating performance, robust growth, improved efficiency and a strong credit and liquidity profile. Global Switch is currently rated at BBB+, Baa2 and BBB by the three major ratings agencies (Fitch, Moody's and S&P, respectively). Global Switch and its shareholders remain committed to maintaining the company's strong investment grade credit rating profile.
John Corcoran, Chief Executive Officer of Global Switch, said:
“Today's successful bond issuance is a significant step for Global Switch, which will secure exciting future growth opportunities for the company. By pro-actively addressing our near term debt maturities and putting in place a new long-dated debt maturity profile, with a much lower interest cost, we can further cement our position as the data centre provider of choice for customers in Europe and Asia-Pacific. In particular, these new bond issuances help us to fund our exciting expansion plans to meet growing global demand for hyperscale data centre infrastructure, while maintaining our focus on strong long-term operational and financial performance and our market leading investment grade credit profile.”
