iStar Successfully Completes Transformative $2B Capital Markets Strategy and is Upgraded by All Three Rating Agencies

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Sep 21, 2017, 16:21 ET

NEW YORK, Sept. 21, 2017 /PRNewswire/ -- iStar (NYSE: STAR) announced that it has successfully completed a transformative set of capital markets transactions that have enhanced its capital structure and improved its earnings profile.

The comprehensive set of transactions address all parts of the Company's capital structure, resulting in iStar having:

Repaid all 2017 and 2018 debt maturities, leaving no corporate debt maturities for the next 21 months
Extended its weighted average debt maturity by 1.5 years to 4.0 years
Reduced annual expenses underlying earnings by approximately $38 million, or $0.55 per share
Lowered cost of capital by approximately 35 basis points
Facilitated new banking relationships
Maintained pro forma liquidity of approximately $750 million to pursue new investment opportunities

The strategy also served as the catalyst for each of the three leading rating agencies to upgrade our credit ratings. The improved ratings should have a positive impact on the marginal cost of future debt issuances, which should in turn allow iStar to broaden the set of investment opportunities that are attractive to pursue.

The table below summarizes the components comprising the capital markets transactions:

Uses		Sources
Repay L+375 secured term loan due Jul. 2020	$473	Amended L+300 secured term loan due Oct. 2021	$400
Repay 4.0% unsecured notes due Nov. 2017	$550	Issue 4.625% unsecured notes due Sept. 2020	$400
Repay 7.125% unsecured notes due Feb. 2018	$300	Issue 5.25% unsecured notes due Sept. 2022	$400
Repay 4.875% unsecured notes due Jul. 2018	$300	Issue 3.125% convertible notes due Sept. 2022	$250
Redeem 7.875% series E preferred stock	$140	Cash	$508
Redeem 7.8% series F preferred stock	$100
Repurchase common stock	$46
Fees, expenses, interest and dividends	$49
Total uses	$1,958	Total sources	$1,958

Secured Term Loan

The Company repriced, extended and downsized its secured term loan from a $473 million facility priced at LIBOR plus 3.75% maturing in July 2020 to a $400 million facility priced at LIBOR plus 3.00% maturing in October 2021. This is the second time the facility was repriced in the past year, resulting in a cumulative reduction of 1.5% in the spread over LIBOR. The facility is collateralized 1.25x by substantially the same assets that collateralized the prior facility.

Secured Revolving Credit Facility

The Company is in the process of amending and restating its secured revolving credit facility to increase the capacity from $250 million to $300 million, extend the maturity date from March 2018 to September 2020 and provide additional flexibility with respect to eligible collateral. However, closing is subject to customary conditions and there can be no assurance that it will be completed.

The secured revolving credit facility will remain fully undrawn pro forma these transactions. The Company is working with several additional banks to potentially participate in and further upsize the facility.

Unsecured Notes and Convertible Notes

The Company issued at par $400 million aggregate principal amount of its 4.625% senior unsecured notes due September 2020 and $400 million aggregate principal amount of its 5.25% senior unsecured notes due September 2022. This compares favorably to the Company's prior issuance of 5-year unsecured notes in March 2017 which were priced with an annual coupon of 6.0%.

iStar also issued at par $250 million aggregate principal amount of its 3.125% senior convertible notes due September 2022 in a separate private offering. The senior convertible notes will be convertible at an initial conversion rate of 64.3563 shares per $1,000 principal amount of senior convertible notes, which is equivalent to an initial conversion price of approximately $15.54 per share of common stock and represents a premium of 35% to the last reported sale price of the Company's common stock on the NYSE on September 14, 2017 of $11.51 per share. The conversion rate and conversion price are subject to adjustment in certain events. The initial purchasers of the senior convertible notes will have the option to purchase up to an additional $37.5 million aggregate principal amount of the senior convertible notes.

The Company intends to use the net proceeds of the offerings and cash on hand to repay in full its 4.00% Senior Notes due November 2017 ($550 million aggregate principal amount), its 7.125% Senior Notes due February 2018 ($300 million aggregate principal amount) and its 4.875% Senior Notes due July 2018 ($300 million aggregate principal amount).

Preferred Stock

The Company also intends to redeem at par its 7.875% Series E Preferred Stock ($140 million aggregate liquidation preference) and its 7.8% Series F Preferred Stock ($100 million aggregate liquidation preference).

Common Stock

In connection with the senior convertible notes offering, the Company used approximately $46 million of cash on hand to repurchase approximately 4 million shares of its common stock at $11.51 per share in privately negotiated transactions with purchasers of the senior convertible notes.

Pro Forma Capital Structure

The table below summarizes the changes to the Company's capital structure as a result of the transactions.

	As of June 30, 2017
	Actual	Adjustment	Pro forma

Cash	$954	($508)	$446

Term loan B facility due 2020 (actual balance on 9/15/17)	473	(473)	-
Refinanced TLB facility due 2021	-	400	400
TLs collateralized by net lease assets	226	-	226
Amended $300mm revolving credit facility	-	-	-
Total secured debt	$699		$626

4.0% senior unsecured notes due 2017	$550	($550)	-
7.125% senior unsecured notes due 2018	300	(300)	-
4.875% senior unsecured notes due 2018	300	(300)	-
5.0% senior unsecured notes due 2019	770	-	$770
6.5% senior unsecured notes due 2021	275	-	275
6.0% senior unsecured notes due 2022	375	-	375
New 4.875% senior unsecured notes due 2020	-	400	400
New 5.25% senior unsecured notes due 2022	-	400	400
New 3.125% convertible notes due 2022	-	250	250
Total unsecured notes	$2,570		$2,470

Trust preferred	$100	-	$100
Total debt	$3,369		$3,196

Common equity¹	$424	($46)	$378
Preferred equity	745	(240)	505
Total book capitalization	$4,538	($459)	$4,079

¹Adjusted common equity was $937 million at June 30, 2017 and $891 million on a pro forma basis. Adjusted common equity represents common equity, gross of $405 million of accumulated depreciation and amortization, $25 million of iStar's proportionate share of accumulated depreciation and amortization relating to equity method investments, and $18 million of general loan loss reserves and $64 million mark-to-market value adjustment of its SAFE stock.

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iStar (NYSE: STAR) finances, invests in and develops real estate and real estate related projects as part of its fully-integrated investment platform. Building on over two decades of experience and more than $35 billion of transactions, iStar brings uncommon capabilities and new ways of thinking to commercial real estate and adapts its investment strategy to changing market conditions. The Company is structured as a real estate investment trust ("REIT"), with a diversified portfolio focused on larger assets located in major metropolitan markets. Additional information on iStar is available on its website at www.istar.com.

SOURCE iStar