In a strategic move to restructure its debt, Ladder Capital (NYSE:LADR) Corp, a prominent real estate investment trust, has issued $500 million in senior unsecured notes with a 7.000% interest rate, maturing on July 15, 2031. The announcement was made today, following the entry into an Indenture agreement on the same day.
The newly issued senior notes, which will pay interest semi-annually, are part of Ladder Capital's efforts to optimize its capital structure. The proceeds from the issuance are earmarked for the repayment of certain secured debts and to support general corporate functions. This financial maneuver is expected to reinforce Ladder Capital's liquidity and financial flexibility.
In compliance with the Indenture, these notes are positioned as senior unsecured obligations, with interest payments commencing on January 15, 2025. The agreement also includes covenants that impose restrictions on additional indebtedness, require subsidiary guarantees, and set asset coverage requirements, among other provisions. These covenants, however, may be nullified if the notes achieve an investment grade rating from two or more rating agencies and no defaults are ongoing.
Furthermore, the agreement stipulates a repurchase obligation for the issuer in the event of specific change-of-control scenarios coupled with a ratings downgrade. The company also retains the right to redeem the notes before maturity, subject to certain conditions outlined in the Indenture, including the possibility of utilizing equity offering proceeds for redemption purposes.
The issuance was targeted at qualified institutional buyers and international investors outside the U.S., and the notes have not been registered under the Securities Act, implying that they cannot be offered or sold within the United States without registration or an exemption.
This financial development is based on the information provided in the Form 8-K filed by Ladder Capital Corp with the Securities and Exchange Commission. The strategic issuance of senior notes is a testament to the company's proactive approach to managing its debt profile and ensuring long-term financial stability.
In other recent news, Ladder Capital Corp has been making significant strides in its financial performance. The company reported robust earnings for the first quarter of 2024, with distributable earnings reaching $42.3 million, or $0.33 per share. This performance resulted in a respectable 10.8% return on equity. Ladder Capital Corp also managed to increase its liquidity to over $1.5 billion while decreasing its adjusted leverage to 1.5 times.
In addition to its strong earnings report, the company's board of directors approved a quarterly dividend of $0.23 per share for the second quarter of 2024. This dividend will be distributed to shareholders of record as of June 28, 2024. Wolfe Research also initiated coverage on Ladder Capital Corp, assigning an Outperform rating and setting a price target of $13.00.
Despite challenges in the commercial real estate sector, Ladder Capital Corp remains focused and anticipates an increase in loan closings due to the current steepening yield curve. These recent developments reveal a company that is actively working towards maintaining a strong financial position and delivering value to its investors.
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