HCP Amends Credit Facility - Analyst Blog


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HCP Inc. ( HCP ), a leading healthcare real estate investment trust (REIT), has recently amended its existing unsecured revolving credit facility to extend the maturity by an additional year as well as reduce its interest burden. The modified credit facility with a borrowing capacity of $1.5 billion is currently scheduled to mature in March 2016.

The amended credit facility bears an annual interest at LIBOR plus 107.5 basis points and a facility fee of 17.5 basis points, as determined by the present credit ratings of the company, representing a 55 basis points dip in the funded interest outflow. However, the other terms and conditions of the erstwhile credit facility were kept unchanged.

HCP has one of the most diversified portfolios in the healthcare sector with exposure to all types of facilities. The product diversity of HCP allows it to capitalize on opportunities in different markets based on individual market dynamics, and provides a hard-to-replicate competitive advantage over its peers.

HCP does not run the healthcare business at its facilities. Rather, it has established business relationships with a number of experienced healthcare management companies or operators who lease these properties on a long-term basis - generally 10 to 15 years. This insulates the company from short-term market swings, and provides a steady source of income.

In addition, healthcare is relatively immune to the economic problems faced by office, retail and apartment companies. Consumers will continue to spend on healthcare while cutting out discretionary purchases. The healthcare industry is the single largest industry in the U.S., based on Gross Domestic Product ( GDP ), and offers stability to the company amidst the volatility in the market.

We maintain our Neutral recommendation on HCP, which presently has a Zacks #3 Rank that translates into a short-term Hold recommendation.We also have a Neutral recommendation and a Zacks #3 Rank for Health Care REIT Inc. ( HCN ), one of the competitors of HCP.

HEALTH CR REIT ( HCN ): Free Stock Analysis Report
HCP INC ( HCP ): 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 Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
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