Pershing Square (PSH) announced the issuance of a private placement of $200m of 12-year bonds with a coupon rate of 3.00%, maturing on July 15, 2032. The 2032 bonds are callable two years prior to their maturity at par with no penalty. Bond proceeds will be available to PSH for new investments and general corporate purposes.
The 2032 bonds will be unsecured and will rank equally in right of payment with PSH’s $1bn of 5.500% bonds due July 15, 2022, and PSH’s $400m of 4.950% Bonds due July 15, 2039. The 2032 bonds will contain the same covenants as those governing the 2039 bonds.
Since the issuance of the 2039 bonds last July, PSH’s total indebtedness to total capital ratio (TITCR), a measure of total debt to total assets, has declined from 19.9% to 15.4% due to strong investment performance. Pro forma for the new issuance, PSH’s TITCR will increase to 17.2%.
“As PSH’s NAV increased substantially this year and PSH’s debt ratio declined, the board decided to take advantage of the low interest rate environment and issue the 2032 Bonds as part of our long-term debt management strategy,” said PSH chair, Anne Farlow. “The board believes that PSH’s ability to issue low-cost, investment-grade, long-term debt is an important competitive advantage for PSH, and in the long-term best interest of PSH shareholders.”
PSH expects to manage its TITCR over time by increasing NAV through strong performance, and/or the refinancing/repayment of the 2022 bonds. As the $1 billion of 2022 Bonds are due in less than two years (July 15, 2022), the issuance of the 2032 Bonds allows PSH to further ladder its maturities as part of PSH’s long-term debt management program.
No impact on the current repurchase program expected
The issuance of the 2032 bonds is not expected to have any impact on PSH’s current share repurchase program or any future extensions or expansions of the program. The issuance of the 2032 bonds does not increase the management or incentive fees paid to the manager, as the fees paid are determined based on NAV, not the total assets of PSH.
PSH: Pershing Square announces $200m bond issuance
What is the new debt ratio? This makes more sense than 4.950% Bonds due July 15, 2039!
Morningstar not registering these bonds as gearing…