UPDATE 4-Hudson's Bay plans $1.25 bln debt refinancing, shares jump

Mon Nov 24, 2014 11:52am EST
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(Adds comments from CEO Richard Baker)

By Euan Rocha and Solarina Ho

TORONTO Nov 24 (Reuters) - Canada's Hudson's Bay Co outlined a $1.25 billion refinancing plan Monday, in a move to reduce interest payments on debt it took on after it bought U.S. rival Saks last year, sending its shares up more than 9 percent in midday trading.

The department store operator said it would take out a 20-year mortgage on the ground portion of its flagship Saks Fifth Avenue store in New York City after an appraiser valued the property at C$4.1 billion ($3.65 billion), significantly more than it paid to buy all of Saks.

HBC shares jumped 9.4 percent in Toronto trading on Monday.

RBC analyst Sabahat Khan said the transaction "highlights the substantial value of HBC's owned real estate portfolio," reduces its interest expenses and extends its debt maturities.

HBC acquired Saks for $2.4 billion in cash last year, and assumed about $500 million of Saks debt. The deal included 13 owned and ground-leased properties.

At the time, it said it was mulling creating a real estate investment trust, to monetize its real estate holdings and help it pay down debt.

HBC said all the refinancing proceeds will be used to repay about $1.2 billion of loans.   Continued...