TSX:NWH.DB.G - Post by User
Post by
incomedreamer11on Oct 02, 2024 11:29am
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Post# 36250024
Scotia update
Scotia update
2025 Debt Maturities Largely Tackled: Valuation Discount Should Narrow On Improved Risk-Reward
OUR TAKE: Positive. With 2025 debt maturities largely tackled, we expect a six handle on the stock. At the start of the year, we said $4 to $5 range if NWH is unable to execute on a large portfolio sale. Then came the news of U.K. portfolio sales in Aug’24 (link for details), and since then we have a grip on five (also Fed pivot narrative has helped immensely as NWH is the poster child of high leverage and high variable-rate debt exposure).
Last night, NWH announced further debt refinancings (details below), and now only $340M of debt is remaning to be tackled in 2025. Considering this comprises $215M of property level debt, and $125M of Convertible Debentures which NWH intend to redeem with proceeds from asset sales, we are effectively done with 2025 debt expiries.
We note that at the start of the year, 2024-25 debt was 60% of total debt (which included $1.6B expiring in 2025). Pro forma UK sale, only 28% of total debt was due which includes 25% expiring in 2025. After refinancing update, we estimate 2025 debt maturities only make up ~10% of total debt which too is largely property-level debt, and we see renewal in normal course. Reiterate $6.50 target.
KEY POINTS
Debt refinancings: NWH secured $421M of new or renewed financing across several facilities with a nominal impact to its weighted average interest rate. Post refinancing, NWH’s 2025 debt maturities reduced to $340M on a proportionate share basis - this includes $215M of mortgages and property level debt and $125M series G convertible debentures (with a coupon rate of 10% p.a.) that is maturing on March 31, 2025. Note: post U.K. portfolio sale, NWH will repay $690M of debt with weighted average interest rate of 7.9%.
Update on asset dispositions: NWH has over $100M assets listed for sale or under conditional contract (on a proportionate basis). Management is aiming to complete the sale of these assets by Q1/25. Proceeds are expected to repay high-cost debt (including series G convertible debenture). See link to our previous note for details on UK transaction.
Valuation discount should narrow on improved risk-reward: Since Q2 results, NWH performed largely in line with the REIT sector (+13%) and currently trades at 16% discount to NAVPU of $6.75. We expect valuation discount to narrow further as NWH makes more progress on deleveraging its portfolio.