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Friday, March 20, 2009
SPG Likes Leverage So Much It Upsizes Bond Offering
Simon Property Group's new "A3/A-" bond issue, which is pricing at a 10.875% yield just got upsized from $500 million to $650 million. Just like the marginal buyers of the MGM 13s of 13 are now very sorry, we smell something quite comparable happening here oh so soon.
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5 comments:
SPG will end in tears.
That's not a fair headline. Clearly paying down their line w/10 year debt puts them in better shape. If they could do more, they should. SPG has their challenges but are in much better shape than their peers due to these proactive moves. All the other REITs are doing nothing, thinking the markets will rebound soon.
Well, ultimately it is the cash flow that matters. And empty commercial space does not have cash flow.
Bang. You are dead.
Brian is right and its not a matter of them liking leverage, but extending maturities. If the window right now is open to hit the market with bonds, then they should paste the market with as many bonds as they'll take...
Paying 7% more interest to flip near to far maturity would be reasonable if the company didn't have to do this exercise about 3 more times to avoid maturity concerns. Plus there is not event horizon on when CRE will actually pick up - if there was a 3-5 year guaranteed upturn I would be the happiest about this deal. However, as it stands, the company should focus on deleveraging, not on extending maturities (although it will do what the market lets it)
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