In order to pay-off its debts, HCP, Inc. (HCP) is raising capital through $350 million worth notes issuance. The company expects to reap net proceeds (after expenses) of about $344.9 million from this senior unsecured notes offering, which will be used for repaying $240 million outstanding under the company’s credit line. The remaining proceeds will be utilized for other corporate needs.
In particular, HCP priced 4.20% senior unsecured notes worth $350 million at 99.537% of the principal amount. The notes, due 2024, have a yield-to-maturity of 4.257%. Notably, owing to investors’ demand, the size of this senior unsecured notes offering was increased. The offering is slated to complete on Feb21, 2014, upon fulfillment of customary closing conditions.
Notably, reputed financial institutions are assisting HCP as joint book-running managers in this offering. These are J.P. Morgan Securities LLC of JPMorgan Chase & Co. (JPM), Goldman, Sachs & Co. of The Goldman Sachs Group, Inc. (GS) and Wells Fargo Securities, LLC of Wells Fargo & Company (WFC).
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.
Recently, HCP reported fourth-quarter 2013 adjusted FFO (funds from operations) per share of 76 cents, 2 cents ahead of the Zacks Consensus Estimate and 4 cents above the prior-year quarter figure. The results were aided by growth in revenues.
Also, for full-year 2013, HCP’s adjusted FFO per share came in at $3.01, substantially higher than the prior-year FFO per share of $2.78. At the end of the year, HCP had cash and cash equivalents of $300.6 million, up from $247.7 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.