UPDATE: HCP Boosts Share Offering; Helps Debt Ratio
August 05 2009 - 9:52AM
Dow Jones News
HCP Inc. (HCP) said Wednesday that it boosted its share offering
by 35% to 15.5 million shares amid strong investor demand and
priced the shares at a 6.4% discount to Tuesday's closing
price.
Analysts said the move is partially in response to the health
care real-estate investment trust's recent purchase of a $720
million participation in the first mortgage debt of post-acute care
services provider HCR ManorCare. On Monday, HCP said it purchased
the participation at a discount for about $590 million. HCP then
said it obtained "favorable" financing to fund 72% of the purchase
price, resulting in a net cash payment by HCP of $165 million.
Although shares were down Wednesday morning, analyst generally
applauded the additional share offering.
"It's a smart move," said David Aubuchon, analyst at Robert W.
Baird & Co. Aubuchon said the increased offering allows HCP to
keep its debt ratio around 45% after its HCR Manorcare investment.
REIT debt ratios are closely watched by investors as a sign of
balance sheet strength and a company's financial
flexibility-especially in a economic downturn.
In addition, the company is taking advantage of the strength in
the equity markets, says Aubuchon. HCP trust joins a number of
other companies across industries who have taken advantage of
increased investor appetite for shares to raise cash in recent
months.
HCP, which has investments including senior housing, medical
office and skilled nursing properties, had originally said late
Tuesday it would offer 11.5 million shares. It expects proceeds to
repay all borrowings under its revolving credit facility, with any
remainder for general corporate purposes.
The offering will boost shares outstanding by at least 6%, and
underwriters will have the option to buy up to 2.3 million more
shares to cover any excess demand.
Tuesday, the company reported second-quarter funds from
operations rose 10%, beating Wall Street's expectations.
HCP shares recently traded down 4.31% to $25.30.
- By Veronica Dagher; 212-416-2261;
veronica.dagher@dowjones.com
(Kerry Grace Been contributed to this report)