IStar Said to Get Commitments for $3 Billion Loan to Avoid Restructuring
By Jonathan Keehner and Krista Giovacco - Mar 10, 2011 3:29 PM CT
IStar Financial Inc. (SFI), the commercial real-estate lender that’s extending debt maturities to avoid restructuring, has received commitments from lenders for a $3 billion loan, according to three people with knowledge of the situation.
The company, which increased rates on $1.5 billion of the loan earlier today, will issue portions of it as soon as Friday and anticipates funding on March 15, said the people, who declined to be named because the deal is private. Proceeds will be used to repay secured loans maturing in June 2011 and 2012 and a portion of the company’s unsecured debt maturing this year.
Chief Executive Officer Jay Sugarman is taking advantage of loan prices approaching a three-year high as the New York-based company deals with $2.7 billion of debt scheduled to mature this year. Shares of IStar, which has funded properties including the Trump SoHo hotel-condominium building in lower Manhattan, have risen 8.5 percent since the company announced on Feb. 22 that it engaged JPMorgan Chase & Co. to arrange the $3 billion facility.
“The completion of the proposed $3 billion bank refinancing transaction would be a major milestone for the company,” said Michael Kim, an analyst at CRT Capital Group in Stamford, Connecticut. “It would address the near-term maturity profile and remove the risk of a restructuring.”
Jason Fooks, a representative for IStar, declined to comment.
Commitment Deadline
JPMorgan had given lenders until 5 p.m. today in New York to let the bank know if they were participating in the deal, the people said. The $3 billion facility will refinance about $380 million of senior unsecured bank debt due 2011 and $2.6 billion of secured bank debt due 2011 and 2012, according to CRT’s Kim.
A $1.5 billion A-2 debt due June 2014 will pay 5.5 percentage points more than the London interbank offered rate, compared with 4.75 percentage points initially proposed, said the people who declined to be identified because the terms are private. The floor on the lending benchmark remains at 1.25 percent, and the company will sell the loan at 98.5 cents on the dollar, as initially proposed, the people said.
Lenders will get 18 months of soft-call protection, the person said, meaning that IStar would have to pay 1 cent more than face value for the first year to reprice the debt, then 0.5 cent more than face value to cut pricing on the loan in the next six months.
A $1.5 billion A-1 loan due in June 2013 will pay 3.25 percentage points more than Libor with a 1.25 percent floor, the people said. That debt will be sold at 99.5 cents on the dollar.
Loan Prices
The Standard & Poor’s/LSTA U.S. Leveraged Loan 100 Index, which tracks the 100 largest dollar-denominated first-lien leveraged loans climbed to 96.48 cents on the dollar on Feb. 14, which was the highest since November 2007. The measure has declined since then and dropped to 95.75 cents yesterday.
“All three rating agencies issued reports noting that the successful completion of the proposed facilities would prompt multiple notch upgrades across the capital structure and at the corporate level,” CRT’s Kim said.
To contact the reporter on this story: Jonathan Keehner in New York at jkeehner@bloomberg.net.; Krista Giovacco in New York at kgiovacco1@bloomberg.net
To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net; Faris Khan at fkhan33@bloomberg.net
