Starwood Property Trust, Inc. (NYSE:STWD), a real estate investment trust, has successfully closed a private offering of $400 million in senior unsecured notes with a 6.000% interest rate, maturing on April 15, 2030. The offering, which was finalized on Thursday, was initially priced on September 26, 2024.
The notes are senior unsecured obligations of the Maryland-based company and rank equally with all of Starwood's existing and future senior unsecured indebtedness. They are subordinated to any current and future secured debt to the extent of the collateral's value but senior to any potential subordinated debt. The notes are not initially backed by guarantees from Starwood's subsidiaries, although certain subsidiaries may be required to do so in the future under specific conditions outlined in the indenture agreement.
Starwood plans to allocate the net proceeds from the notes to finance or refinance green and social projects, in line with their environmental and social governance goals. Until the funds are fully allocated to such projects, the company intends to use the proceeds for general corporate purposes, which may include repaying existing debt under its repurchase facilities.
Interest on the notes will be paid semi-annually, starting from April 15, 2025, and the notes will be redeemable before maturity under certain terms. Specifically, Starwood may redeem the notes at a "make-whole" premium before October 15, 2029, and at par thereafter. Additionally, up to 40% of the notes may be redeemed before October 15, 2027, using proceeds from certain equity offerings at a price of 106.00% of the principal amount.
The indenture includes covenants limiting additional indebtedness, requiring maintenance of a minimum level of unencumbered assets, and setting forth the conditions under which the company can merge or consolidate with another entity. These covenants will cease to apply from the Covenant Termination Date if the notes achieve investment-grade ratings from selected agencies and no default has occurred.
If a Change of Control Triggering Event happens, Starwood must offer to repurchase the notes at 101% of the principal amount, plus accrued interest. Events of Default are specified in the indenture, which could lead to the acceleration of the debt's maturity
In other recent news, Starwood Property Trust reported solid Q2 earnings of $158 million, or $0.48 per share, driven by a diversified investment approach. The company committed to $925 million of new investments, with the commercial lending segment originating $353 million in loans. However, loan repayments in this segment outpaced originations, totaling $606 million. The residential lending segment's loan portfolio grew to $2.5 billion. Starwood Property Trust also updated its dividend reinvestment plan, offering shareholders the opportunity to reinvest dividends and purchase additional shares directly.
Simultaneously, Starwood Property Trust entered into an Underwriting Agreement with Citigroup Global Markets Inc., Goldman Sachs & Co. LLC, and Morgan Stanley & Co. LLC for a public offering of 17.5 million shares of its common stock. The company anticipates net proceeds of approximately $340.5 million, potentially rising to $391.7 million if the underwriters exercise their additional share option in full.
Moreover, Marriott International (NASDAQ:MAR) and its subsidiary Starwood Hotels & Resorts Worldwide have agreed to establish a comprehensive information security program as part of a settlement with the U.S. Federal Trade Commission. This agreement is a response to allegations regarding multiple data breaches that occurred between 2014 and 2020, impacting over 344 million customers globally. Marriott also agreed to pay a $52 million penalty to 49 states and the District of Columbia to address similar data security allegations.
InvestingPro Insights
Starwood Property Trust's recent $400 million senior unsecured notes offering aligns with its financial strategy, as reflected in several key metrics from InvestingPro. The company's dividend yield stands at an impressive 9.71%, underscoring its commitment to shareholder returns. This is further supported by an InvestingPro Tip noting that Starwood "has maintained dividend payments for 16 consecutive years," demonstrating a consistent track record of rewarding investors.
The company's financial health is evident in its ability to meet short-term obligations, with InvestingPro data showing that "liquid assets exceed short term obligations." This liquidity position strengthens Starwood's capacity to manage its new debt issuance effectively.
Additionally, Starwood's profitability outlook remains positive, with analysts predicting the company will be profitable this year. This forecast is reinforced by the company's performance over the last twelve months, during which it has been profitable according to InvestingPro Tips.
For investors seeking a more comprehensive analysis, InvestingPro offers 6 additional tips for Starwood Property Trust, providing deeper insights into the company's financial position and market performance.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.