Boston Properties Issues $700M Senior Notes, Refinances Debt
Zacks Investment Research | Aug 20, 2019 08:36AM ET
Boston Properties, Inc. (NYSE:BXP) announced the pricing of a public offering of $700 million of 2.9% senior notes that will be sold through the company’s operating partnership, Boston Properties Limited Partnership (BPLP). The senior unsecured obligations, due on Mar 15, 2030, were priced at 99.954% of the principal amount, resulting in an effective yield to maturity of 2.905%.
Subject to certain closing conditions, the offering is projected to close on Sep 3, 2019.
The company expects to raise roughly $693.8 million in net proceeds through this offering. BPLP plans to redeem its outstanding 5.625% senior notes of $700 million aggregate principal amount. These senior notes are scheduled to mature on Nov 15, 2020. Pending the redemption, BPLP intends to invest in short-term, interest-bearing deposit accounts.
However, BPLP anticipates recording a loss on early extinguishment of debt amounting to nearly 17 cents per share in third-quarter 2019. In addition, Boston Properties projects that the refinancing will affect 2019 funds from operations (FFO) per share by nearly 14 cents. This estimate reflects the loss on early debt extinguishment, interest savings on account of the refinancing and interest earned on the net proceeds of the offering pending the redemption.
Concurrent to its second-quarter 2019 earnings call, Boston Properties had provided the third-quarter 2019 FFO per share guidance of $1.75-$1.77and a full-year 2019 estimate of $7.02-$7.08. Nonetheless, this outlook does not reflect the refinancing transactions.
Boston Properties’ Cash Position
Boston Properties exited the June-end quarter with cash and cash equivalents of $1.09 billion, up from $543.3 million as of Dec 31, 2018.
During the six-month period ended Jun 30, 2019, the company generated cash flow from operations of $565.6 million, up from the $560.8 million recorded during the comparable period last year.
Conclusion
By paying down its debt obligations, this offering is likely to provide flexibility to the company. In addition, it reflects the company’s focus to address its financial obligations in an efficient way. Moreover, since unsecured notes can be borrowed at lower rates, the new debt will result in lower cost of capital, consequently strengthening its balance sheet and supporting growth.
Over the past three months, shares of this Zacks Rank #3 (Hold) company have declined 3.3%, underperforming the Zacks Investment Research
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