Digital Realty (NYSE:DLR) Trust, L.P., a subsidiary of Digital Realty Trust, Inc., has announced the issuance of $1.15 billion in 1.875% exchangeable senior notes due 2029, effective today. The notes were issued under an indenture with U.S. Bank Trust Company, National Association, as trustee. This strategic financial move also grants initial purchasers a 13-day option to acquire an additional $150 million in notes.
The notes, guaranteed by Digital Realty Trust, Inc., are senior unsecured obligations, ranking equally with current and future unsecured debt. They are subordinated to secured debt to the extent of the collateral's value and structurally subordinated to all liabilities of non-guarantor subsidiaries.
Interest on the notes is payable semi-annually, with the first payment due on May 15, 2025, and the notes maturing on November 15, 2029. Holders can exchange their notes for cash, shares of Digital Realty Trust, Inc.'s common stock, or a combination thereof, under certain conditions. The initial exchange rate is set at approximately 4.7998 shares per $1,000 principal amount, equating to an initial exchange price of roughly $208.34 per share.
The notes are redeemable at the issuer's discretion, subject to liquidity conditions and stock price thresholds, after November 22, 2027, but before maturity. If a "Fundamental Change" occurs, as defined in the indenture, note holders may require the issuer to repurchase their notes at the principal amount plus accrued interest.
Additionally, the company has entered into a registration rights agreement, obligating it to file a resale registration statement with the SEC, facilitating the resale of shares issued upon exchange of the notes. If the company fails to meet its registration obligations, additional interest may accrue on the notes.
This financial activity is based on a press release statement and reflects the company's aim to manage its capital structure efficiently. The notes were offered to qualified institutional buyers in accordance with Rule 144A under the Securities Act, without public offering. The maximum number of shares initially available for issuance upon exchange of the notes is 6,623,655, subject to anti-dilution adjustments.
In other recent news, Digital Realty Trust has announced its intention to offer $1 billion in exchangeable senior notes through its subsidiary. This move is part of the company's financial strategy, with the proceeds targeted towards repaying borrowings, investing in property and business acquisitions, and funding development. The notes, due in 2029, can be exchanged under certain conditions and will be guaranteed by Digital Realty.
In the realm of financial analysis, several firms have adjusted their outlook on Digital Realty. Citi maintained a Buy rating and increased the price target to $212, citing the company's impressive third-quarter performance and potential for accelerated financial growth. Deutsche Bank (ETR:DBKGn), while maintaining a Hold rating, lowered its price target to $159. Mizuho (NYSE:MFG) reaffirmed its Outperform rating on Digital Realty, with a steady price target of $170, and RBC Capital Markets increased its price target for the company to $207.
Digital Realty's recent financial performance has been noteworthy. The company's third quarter of 2024 saw new leasing volume reaching $521 million and a backlog of leases set to commence increasing to nearly $860 million. The company's Funds From Operations (FFO) of $1.67 slightly surpassed the consensus estimate of $1.66. In response to these results, Digital Realty raised its guidance midpoint to $6.70, slightly above the Street's expectation of $6.66. The firm's projections for 2024 include revenues at $5.58 billion, EBITDA at $2.95 billion, capital expenditures at $2.30 billion, and core FFO per share at $6.70.
InvestingPro Insights
Digital Realty Trust's recent issuance of $1.15 billion in exchangeable senior notes aligns with its strategy to manage its capital structure efficiently. This move is particularly interesting when viewed alongside some key InvestingPro data and tips.
According to InvestingPro data, Digital Realty Trust has a market capitalization of $61.17 billion and operates with a moderate level of debt. This new debt issuance appears to be a calculated move to capitalize on favorable market conditions while maintaining a balanced financial structure.
InvestingPro Tips highlight that Digital Realty Trust is a prominent player in the Specialized REITs industry and has maintained dividend payments for 21 consecutive years. This consistent dividend history, coupled with the current dividend yield of 2.67%, may appeal to income-focused investors.
The company's stock has shown strong performance recently, with a 23.87% price total return over the last three months and a 46.83% return over the past year. This positive momentum, combined with the fact that the stock is trading near its 52-week high, suggests investor confidence in the company's strategy and future prospects.
For readers interested in a more comprehensive analysis, InvestingPro offers 13 additional tips for Digital Realty Trust, providing a deeper understanding of the company's financial health and market position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.