KKR Real Estate Finance Trust Announces Closing of $550 Million Term Loan B
New York, NY – KKR Real Estate Finance Trust Inc. (KREF) recently announced the successful closing of a new Term Loan B with an aggregate principal amount of $550 million. This loan comes due in 2032 and is intended to replace the existing Term Loan B, which was set to mature in 2027. The company intends to utilize the net proceeds from this new loan to repay the existing debt, as well as to cover other corporate expenses.
Terms of the New Term Loan B
The New Term Loan B priced at 99.875% and bears interest at the Secured Overnight Financing Rate (SOFR) plus 325 basis points. SOFR is a benchmark interest rate that replaced the London Interbank Offered Rate (LIBOR) in 2021. This new loan represents a significant increase in borrowing costs for KREF, as its previous Term Loan B carried an interest rate of LIBOR plus 225 basis points.
Impact on KREF
For KREF, this new loan signifies an opportunity to refinance an upcoming maturity, ensuring that it maintains a stable debt profile. However, the increased borrowing cost could put pressure on the company’s earnings, reducing its net interest income and potentially impacting its distributable earnings. This could, in turn, affect KREF’s ability to distribute dividends to its shareholders, as the company’s distribution policy is tied to its distributable earnings.
- Refinancing an upcoming maturity
- Increased borrowing cost
- Potential impact on net interest income and distributable earnings
- Possible effect on dividend distribution
Impact on the World
The shift from LIBOR to SOFR as the primary benchmark for interest rates is a significant development in the financial world. KREF’s decision to refinance using SOFR illustrates the growing acceptance of this new benchmark. As more companies transition from LIBOR to SOFR, it will further solidify its position as the new standard for interest rate calculations.
- Transition from LIBOR to SOFR as the primary benchmark
- Growing acceptance of SOFR in the financial industry
Conclusion
KREF’s successful closing of a new Term Loan B for $550 million marks an important milestone for the company, allowing it to refinance an upcoming maturity and maintain a stable debt profile. However, the increased borrowing cost associated with SOFR could impact KREF’s net interest income and distributable earnings, potentially affecting its ability to distribute dividends to shareholders. Furthermore, KREF’s adoption of SOFR as its benchmark for borrowing costs underscores the growing acceptance of this new benchmark in the financial industry.
As the financial world continues to transition from LIBOR to SOFR, we can expect more companies to adopt this new benchmark in their borrowing activities. This trend will further solidify SOFR’s position as the new standard for interest rate calculations and could have far-reaching implications for the global financial markets.
