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Piedmont Offers Notes to Pay Debt

Zacks Equity Research

Piedmont Office Realty Trust Inc. (PDM) recently offered senior unsecured notes to pay off debt. In particular, the company’s operating partnership – Piedmont Operating Partnership, LP – priced 4.450% senior unsecured notes worth $400 million at 99.791% of the principal amount.

The offering of the notes, due 2024, is projected to complete on Mar 6, subject to customary closing conditions. Shares were up by a cent in the last two days.

Piedmont has planned to utilize the proceeds to pay off a secured loan worth $350 million, with an interest rate of 4.84%. The maturing loan will open for prepayment without penalty on Mar 7. J.P. Morgan of JPMorgan Chase & Co. (JPM) and BofA Merrill Lynch of Bank of America Corporation (BAC) are helping Piedmont in this offering as active joint book-running managers. Alongside, other banking giants such as U.S. Bancorp (USB) are assisting Piedmont as passive joint book-running managers.

For Piedmont, 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 Piedmont to pursue its portfolio enhancement activity that will strengthen its top line.

Notably, Piedmont reported its fourth-quarter 2013 results earlier this month. Its core funds from operations (:FFO) of 37 cents missed the Zacks Consensus Estimate on higher expenses. However, core FFO was up a cent from the prior year quarter on lower share count reflecting share buybacks in 2013. The company exited 2013 with cash and unsecured line of credit capacity of about $129.8 million.

This real estate investment trust (:REIT) 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.

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