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Medical Properties (MPW) Prices $1.3B Senior Notes, To Repay Debt

Zacks Equity Research
·4 min read

Medical Properties Trust, Inc. MPW has priced the previously announced public offering of $1 billion in aggregate principal amount of senior notes due 2031. The debt obligation will mature on Mar 15, 2031, and have been priced with a coupon of 3.500%.

Beginning Mar 15, 2020, interest on the notes will be paid semi-annually in arrears. The notes have been issued as senior unsecured obligations.

The offering is anticipated to close on Dec 4, 2020, conditional on customary closing norms.

The company plans to utilize $833 million of the net proceeds to fund the full redemption of 5.500% senior notes due 2024 and 6.375% senior notes due 2024, inclusive of accrued and unpaid interest thereon. As of Sep 30, $300 million and $500 million in aggregate principal amount of the 5.500% senior notes and 6.375% of senior notes, respectively, were outstanding.

Following the allocation mentioned above, the remainder of the net proceeds will be used for general business purposes, including the repayment of the outstanding amount under the company’s revolving credit facility, working capital and capital expenditure along with potential future buyouts.

Its efforts to strengthen its near-term liquidity in these testing times and opportunistically tap the debt market amid the current low-interest-rate environment are strategic fits. Notably, the notes will be issued at 3.500%, which is lower than the company’s weighted average interest rate of 3.830% (as of Sep 30, 2020).

Moreover, addressing its near-term debt maturities will enhance Medical Properties’ financial flexibility and extend average debt maturity term of debt. Further, since the notes, which will be repaid, carry higher interest rates compared to the newly-issued notes, this move will likely result in lower interest expenses.

Further, it will provide the company will ample resources to fund any accretive acquisitions. In fact, Medical Properties has been active on the buyout front despite the lackluster and uncertain environment presented by the pandemic. Year to date, the company has invested around $3 billion in hospital real estate acquisitions, most notable being the purchase of a portfolio of hospital real estate in the U.K. for roughly $2 billion in January.

However, the notes offering increase Medical Properties’ long-term debt obligation.

Shares of this Zacks Rank #3 (Hold) company have gained 11.1% over the past six months compared with the industry’s rally of 12.7%.


Stocks to Consider

Alpine Income Property Trust, Inc.’s PINE funds from operations (FFO) per share estimates for 2020 have been revised upward by 1.7% to $1.21 over the past month. The company carries a Zacks Rank of 2 (Buy), currently. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Extra Space Storage Inc’s EXR Zacks Consensus Estimate for 2020 FFO per share has moved upmarginally to $5.02 over the past month. The company currently carries a Zacks Rank of 2.

City Office REIT, Inc.’s CIO Zacks Consensus Estimate for 2020 FFO per share has improved 2.6% to $1.17 in a month’s time. The company has a Zacks Rank of 2 at present.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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