HCP Raises Capital via Senior Notes Issuance to Pay Off Debt - Analyst Blog

By
A A A

In order to pay off its debts, HCP, Inc. ( HCP ) is raising capital through senior notes issuance. In particular, the company priced 3.875% senior unsecured notes worth $800 million at 99.630% of the principal amount. The notes, due 2024, have a yield-to-maturity of 3.920%. Notably, owing to investors' demand, the size of this senior unsecured notes offering was increased.

HCP expects to reap net proceeds (after expenses) of about $789.7 million from this senior unsecured notes offering. This amount along with its cash on hand will be used for repaying $300 million outstanding (as of Aug 6, 2014) under the company's revolving credit line. The remaining proceeds will be utilized for other corporate needs such as financing its formerly announced joint venture deal with Brookdale Senior Living Inc. ( BKD ).

A consortium of reputed financial institutions such as - Merrill Lynch, Pierce, Fenner & Smith Inc. of Bank of America Corp. ( BAC ) and Morgan Stanley & Co. LLC of Morgan Stanley ( MS ) - is assisting HCP as joint book-running managers. This offering is slated to complete on Aug 14, upon fulfillment of customary closing conditions.


For HCP, the aforementioned notes offering is a strategic fit as it will lower debt and consequently the interest expenses. Also, the increased financial flexibility will enable HCP to pursue its portfolio enhancement activity that will strengthen its top line.

Last week, HCP reported second-quarter 2014 adjusted FFO (funds from operations) per share of 75 cents, in line with the Zacks Consensus Estimate and up 4.2% from 72 cents reported in the year-ago quarter. The results were aided by growth in revenues.

Encouragingly, this healthcare real estate investment trust (REIT) raised its 2014 FFO outlook to the range of $3.01 - $3.07 per share from the prior projection of $2.96 - $3.02. At the end of the quarter, HCP had cash and cash equivalents of $54.1 million, as against $300.6 million at the prior-year end.

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

Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

HCP INC (HCP): Free Stock Analysis Report

MORGAN STANLEY (MS): Free Stock Analysis Report

BANK OF AMER CP (BAC): Free Stock Analysis Report

BROOKDALE SENR (BKD): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research



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: HCP , MS , BAC , BKD

Zacks.com

Zacks.com

More from Zacks.com:

Related Videos

Don't Pay Up to Play REITs
Don't Pay Up to Play REITs          

Stocks

Referenced

Most Active by Volume

100,376,898
  • $17.62 ▲ 0.51%
83,231,837
  • $25.62 ▲ 1.91%
75,739,329
  • $111.78 ▼ 0.77%
65,297,937
  • $36.37 ▼ 1.76%
59,053,093
  • $47.66 ▲ 0.29%
53,482,350
  • $2.59 ▼ 0.38%
51,504,284
  • $7.34 ▲ 2.37%
51,434,656
  • $8.14 ▲ 6.96%
As of 12/19/2014, 04:15 PM


Find a Credit Card

Select a credit card product by:
Select an offer:
Search
Data Provided by BankRate.com