A&B cuts deal to borrow $125M

The loan from Prudential will help fund realty developments

Alexander & Baldwin Inc. has negotiated an agreement with Prudential Capital to borrow $125 million at favorable interest rates to help fund real estate projects that include a high-end residential development on Kauai and a high-rise condominium on Oahu.

The Honolulu-based company, which has about $212 million in outstanding debt with Prudential, also is being provided a $400 million "shelf facility" that will let A&B increase its borrowing power up to that amount, according to a filing yesterday with the Securities and Exchange Commission. With its new agreement and the amount it currently owes Prudential, A&B will be left with an additional $63 million it can borrow from the financing arm of Prudential Insurance.

Chris Benjamin, chief financial officer for A&B, said some of the money will be used for its Keola La'i 352-unit condominium complex on Queen and South streets, as well as its 1,200-unit Kukui'ula resort residential community on Kauai. He said 300 people have signed up to buy the first phase of units in the 10-year Kauai project, which is being developed with Phoenix-based joint venture partner DMB Associates Inc.

Benjamin said A&B is hoping to close on 122 units this year, and that there are about 300 people signed up to buy the first wave of houses. There has been a "fairly small" number of cancellations, he said.

The Kauai project's infrastructure costs, which include the golf course and clubhouse but not the expense of the houses, are projected to be $850 million, up from an earlier forecast of $750 million, according to A&B's last conference call. Benjamin said those projected costs still remain at $850 million.

A&B said the $125 million loan will be taken out in two $50 million installments and one $25 million installment, which carry annual fixed interest rates of 5.53 percent, 5.55 percent and 5.56 percent, respectively.

Of A&B's current balance with Prudential, $97.9 million is at an average interest rate of 6.27 percent and $114.5 million from subsidiary Matson Navigation Co. is at an average rate of 4.74 percent.