Welltower (WELL) Boosts Liquidity Amid Coronavirus Mayhem
Zacks Investment Research | Mar 23, 2020 10:08PM ET
In an effort to boost its liquidity profile and further strengthen the balance sheet, given current capital-market conditions and the uncertain impact of the COVID-19 pandemic, Welltower Inc. (NYSE:WELL) recently acquired commitment for new $1-billion term loan. The company has taken steps that helped it increase available near-term liquidity to $3.5 billion.
The company, which had $338 million of cash and cash equivalents and $1.5 billion of available borrowing capacity under its unsecured revolving credit facility as of Mar 20, 2020, obtained a two-year unsecured term loan of $1 billion with interest at a rate of 30-day LIBOR +1.20% (based on its credit rating).
The amount under the term loan can be increased up to an additional $200 million if Welltower exercises its right. With the proceeds, the company intends to repay borrowings under its unsecured revolving credit facility and commercial paper program, finance future growth opportunities and for general corporate needs.
Apart from these, Welltower received net proceeds totaling $694 million from dispositions as of Mar 20, 2020. Also, as of the same date, the company has forward sale agreements covering 6.8 million shares of common stock under its ATM program, at an initial weighted average price of $86.48 per share. This provides the option to generate up to $588 million in gross proceeds if the company, at its discretion, settles the forward sale agreements through Dec 31, 2020. The company also has no material unsecured notes maturing until 2023.
Notably, the coronavirus pandemic is wreaking havoc across the globe. The number of infected patients in the United States continues to spike, while the spread of the virus outside of mainland China continues.
Recently, Welltower noted that two of its residents tested positive for COVID-19 in the company’s U.S. properties as of Mar 16. The company also said that “elevated protocols” were placed since late January to contain the spread of the virus. Though elevated protocols might lead to slower new resident flow in the short term, the company has also observed a “commensurate decline” in voluntary move outs as well as higher lead-to-closing ratios.
Welltower has a differentiated portfolio of seniors housing and medical office assets, which positions it well to capitalize on growing demand for healthcare assets amid rising healthcare spending and a favorable demographic trend. Efforts to expand the outpatient medical portfolio through accretive acquisitions are encouraging and a decent balance sheet offers ample scope to pursue growth moves. However, high supply of seniors housing assets will likely stiffen competition, while large-scale sales might induce near-term earnings dilution. Also, the recent outbreak of coronavirus adds to its woes.
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Shares of this Zacks Rank # 3 (Hold) company have depreciated 46.8%, which is wider than its Zacks Investment Research
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