AvalonBay Raises Cap to Reduce Debt - Analyst Blog


In order to pay off outstanding debt, AvalonBay Communities Inc. ( AVB ) is raising capital through notes issuance. The company priced 3.625% unsecured notes worth $400 million at 99.728% of the principal amount. From the offering, it expects to reap around $396.2 million, inclusive of estimated issuance costs.

Notably, this apartment real estate investment trust (REIT) intends to utilize the proceeds to pay off outstanding debt under its unsecured revolving credit facility worth $1.3 billion. The remaining amount will likely be used to fulfill other corporate needs such as acquisition, development and redevelopment of apartment assets and reducing and refinancing other debts.

The unsecured notes will mature on Oct 1, 2020 and have a yield to maturity of 3.669%. The interest on the notes will be paid semi-annually on Apr 1 and Oct 1. The first payment will be made on Apr 1, 2014. Notably, the settlement is slated to complete by Sep 20, 2013.

As a matter of fact, Deutsche Bank of Deutsche Bank AG ( DB ), Morgan Stanley ( MS ) and UBS Investment Bank of UBS AG ( UBS ) supported AvalonBay in this offering as lead representatives of the agents.

As of Jun 30, 2013, AvalonBay had $142.0 million outstanding under its $1.3 billion unsecured credit facility. The company had nearly $205.2 in cash, restricted cash, and cash in escrow as of that date.

We believe that the above-mentioned transaction is strategic fit as it will lower AvalonBay's debt and thereby interest expenses as well. Moreover, increased financial flexibility will enable AvalonBay to pursue strong portfolio restructuring activity that will go a long way in enhancing top-line growth.

AvalonBay currently carries a Zacks Rank #3 (Hold).

AVALONBAY CMMTY (AVB): Free Stock Analysis Report

DEUTSCHE BK AG (DB): Free Stock Analysis Report

MORGAN STANLEY (MS): Free Stock Analysis Report

UBS AG (UBS): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: AVB , DB , MS , UBS



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