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October 20, 2009
Forest City in the News
Not "the News," exactly, since these are both Forest City-generated press releases, but newsworthy, for sure, as to the state of the company's finances.
Forest City Provides Update on Credit Line Renewal, Other Financing Activity, via Yahoo! Finance
Forest City Enterprises, Inc. (NYSE: FCEA and FCEB) today provided a progress update on the modification and renewal of its $750 million revolving credit facility, and also announced extensions and refinancings among its property-level, non-recourse debt maturities.
The Company has received preliminary, non-binding commitments from a majority of its current 14-member bank group to participate in a renewed revolving credit facility. The preliminary commitments are based on a revised term sheet that is the subject of active discussions between the Company and its lenders, and are conditional on approval of the term sheet by all participating lenders, and any or all of the lenders who have preliminarily approved the term sheet may retract their approvals. Preliminary commitments to date account for approximately 60 percent of the total commitment being sought. While the Company cannot predict the outcome of this approval process and any further negotiations with the lenders, the term sheet for the extension of the facility contemplates a reduced total commitment from the lenders, increased borrowing costs, modification to the financial covenants and the addition of operational covenants. If approved, additional terms and conditions of the facility will be announced at the time of closing. The current facility is scheduled to mature in March 2010.
Forest City also closed a three-year extension of a $90.8 million loan on Two Hanson Place, the office building atop its Atlantic Terminal mall.
Forest City to Offer $175 Million Convertible Senior Notes
Forest City Enterprises, Inc. (NYSE: FCEA - News and FCEB - News) today announced its intention to offer, subject to market and other conditions, $175 million aggregate principal amount of convertible senior notes due 2016 ("the Notes").
...The Notes are expected to be convertible, at the holder's option, into Forest City's Class A common stock at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date. The interest rate, conversion rate, conversion price and other terms of the Notes will be determined by negotiations between Forest City and the initial purchasers of the Notes.
...Forest City expects to use the net proceeds from the offering to pay the cost of the convertible note hedge transactions, to reduce outstanding borrowings on the Company's $750 million revolving credit facility, and for general corporate purposes, which, depending on prevailing market conditions, could include repayment of debt with earlier maturities.
NoLandGrab: We're far from expert in corporate finance, but it appears to us that Forest City is yet again struggling to make ends meet.
It sounds like some of the company's current lenders are not too hot to extend credit to Forest City, since the term sheet "contemplates a reduced total commitment from the lenders, increased borrowing costs, modification to the financial covenants and the addition of operational covenants."
Furthermore, the $175 million in convertible notes, which are not secured, are potentially dilutive to current shares, and proceeds may be used to repay other loans that are coming due.
Finally, if market reaction is any indication, this is not good news for Forest City — Forest City stock is trading nearly 10% lower this morning.
Posted by eric at October 20, 2009 11:24 AM