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May 15, 2009
Forest City in the News
Morningstar.ca, Forest City Issues Shares and Updates 1Q
Forest City Enterprises FCE.A announced the issuance of 45.5 million Class A common shares priced at $6.60 each with an overallotment option of an additional 6.8 million shares, increasing total share count (including the overallotment) by roughly 51% and Class A share count by 65%. The offering price is accretive to our previous fair value, so we are raising our estimate to account for a slightly lower estimated cost of capital and a reduced probability for a corporate level default.
Forest City plans to use the nearly $345 million in proceeds to pay down the outstanding balance on its $750 million credit facility, which matures in March 2010. This represents a material reduction in the company's recourse debt, reducing the likelihood of a corporate level default. Still, Forest City has nearly $1.5 billion of maturing debt remaining in 2009 and 2010--a majority of which is nonrecourse and at the property level. In our opinion, these obligations are large enough to give cause for concern. We still think further equity issuance is possible over the next couple of years, as asset sales alone will likely prove insufficient in managing maturing debt and deleveraging the company.
Crain's Cleveland Business, Forest City Enterprises prices sale of 45.5 million shares
Forest City said it is in active negotiations toward sales of, or joint ventures involving, about $1.3 billion of assets, representing net after-tax proceeds of about $180 million. The company said it anticipates continuing to pursue more asset sales or joint ventures over the 2009-2012 period.
Forest City said no definitive agreements have been entered into to date, and no assurance can be given that these asset sales or joint ventures will occur.
Reuters, Forest City shares tumble after offering announced
In late morning trade, Forest City shares were down 17.2 percent at $6.22, and were among the top percentage losers on the New York Stock Exchange.
..."We believe the equity raise is part of a multi-step process to deleverage the balance sheet which may also include future dividend reductions and planned asset sales," Goldman Sachs analyst Jonathan Habermann wrote in a research note.
NY Times Deal Book, Debt-Laden Companies Rush to Sell Stock
Not surprisingly, the capital-hungry finance and insurance industries are leading the way in offering new stock, accounting for a little more than half of the sales year to date.
But nonfinance companies such as MGM Mirage, Cliffs Natural Resources, Energizer Holdings and Forest City Enterprises have also lined up in the parade to tap the capital markets.
Unlike the banks and finance companies, many of which need the additional cash to satisfy the capital requirements from the government’s stress tests, these other companies are generally looking to use the new capital to pay down their increasingly burdensome debt loads, much of which was racked up during the boom times, in some cases to finance deals.
The Wall St. Journal, Rambus Roars; Stock-Sale Plan Fells Forest City
Class A shares of Forest City Enterprises (NYSE) fell 1.21, or 16%, to 6.30 as the Cleveland real-estate developer set plans to sell 40 million shares.
The Cleveland Plain Dealer, Forest City prices stock offering, expects more than $300 million from sale
The real estate company, based in Cleveland, released additional details Thursday morning about its plans to issue and sell common shares to raise cash and pay off debt. Forest City said it will sell 45.5 million shares at $6.60 per share, with the option to sell another 6.8 million shares depending on demand.
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The company expects its offering to close Tuesday.
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Facing a crisis in commercial real estate and limited access to new loans, real estate companies including Forest City have been trying to reduce their debts and build up cash.
Posted by eric at May 15, 2009 12:24 AM