Regency Centers Corporation REG recently disclosed the physical settlement of its Common Stock Forward Sale Agreements with Wells Fargo Bank, National Association (“Forward Purchaser”), for approximately $186 million. The company plans to use the proceeds to lower its near-term debt obligations and meet other general corporate needs.
According to the forward sale agreements, entered on Jan 14 and Jan 15 of 2015, Regency Centers consented to sell a total of 2,875,000 shares of its common stock at an offer price of $67.40 per share to the Forward Purchaser. This was expected to generate around $193.8 million in proceeds. However, after considering adjustments for interest, dividends and underwriter’s discount, the settlement resulted in net proceeds of $186 million.
Notably, a forward sale agreement is a secured way for companies to raise funds when a need for the same arises. This is because proceeds are generated only when the actual stock issuance takes place. Moreover, a set offer price serves as a hedge against equity market volatility.
Of the total proceeds, nearly $110.7 million will be utilized to partially redeem 5.875% Senior Unsecured Notes due in 2017. The figure includes accrued and unpaid interest (up to the redemption date of Nov 27, 2015), as well as a prepayment premium of approximately $8.1 million.
Wells Fargo Securities, LLC, part of Wells Fargo & Company WFC, acted as the sole underwriter for the above-mentioned offering.
As of Sep 30, 2015, Regency Centers’ total outstanding debt stood at $2.02 billion, while its pro-rata share of cash and cash equivalents was $40.7 million.
Regency Centers currently holds a Zacks Rank #2 (Hold). Investors interested in the retail real estate investment trust space can also consider Agree Realty Corp. ADC and CBL & Associates Properties Inc. CBL. Both these stocks carry the same Zacks Rank as Regency Centers.
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