Starwood Property Trust issues $500M in senior notes

Starwood Property Trust, Inc. (NYSE:STWD), currently trading near its 52-week low at $17.28 and maintaining a robust 10.91% dividend yield, has finalized a private offering of $500 million in senior unsecured notes with a 6.500% interest rate, maturing on October 15, 2030. According to InvestingPro analysis, the company has demonstrated strong dividend consistency, maintaining payments for 17 consecutive years. This financing event, which took place today, was conducted under an indenture between the company and The Bank of New York Mellon (NYSE:BK), serving as trustee.

The notes, which were priced on March 25, 2025, will pay interest semi-annually beginning October 15, 2025. These securities were offered to qualified institutional buyers and non-U.S. persons in accordance with the Securities Act regulations, and they come with transfer restrictions.

Starwood Property Trust plans to use the net proceeds to finance or refinance green and social projects, with any funds allocated to past projects potentially being used to repay existing debt. Until the full allocation for such projects is achieved, the proceeds may serve general corporate purposes, including debt repayment under the company’s repurchase facilities.

The notes are on par with the company’s current senior unsecured debt and will be senior to any future subordinated debt. However, they are effectively subordinated to secured debt to the extent of the collateral's value. The notes could potentially be guaranteed by the company's subsidiaries under certain conditions, as described in the indenture.

The company may redeem the notes before maturity at a "make-whole" premium or at par after a specified date. Additionally, a portion of the notes may be redeemed earlier using proceeds from certain equity offerings.

A Change of Control Triggering Event would necessitate an offer to repurchase the notes at 101% of the principal amount plus accrued interest. The indenture also includes covenants limiting additional indebtedness and requiring maintenance of a specified level of unencumbered assets, among other stipulations.

The completion of this offering reflects Starwood Property Trust's financial strategy and compliance with its covenants. With a debt-to-equity ratio of 2.71 and a market capitalization of $5.8 billion, the company maintains a significant presence in the commercial mortgage REIT sector. The information presented is based on a press release statement and InvestingPro data, which offers comprehensive analysis including Fair Value estimates and 10+ additional ProTips for informed investment decisions.

In other recent news, Starwood Property Trust, Inc. reported its Q4 2024 earnings, exceeding expectations with earnings per share of $0.48 against a forecast of $0.47. However, the company fell short on revenue, reporting $454.39 million compared to the anticipated $472.03 million. Starwood committed $1.6 billion to new investments during the quarter, indicating a strategic focus on expanding its lending activities and exploring new markets in 2025. In another development, Starwood Capital Group, in a joint venture, acquired a portfolio of master-planned communities in Texas valued at approximately $800 million. This acquisition includes 11 communities in Dallas, Houston, and Austin, enhancing Starwood Capital's real estate investment portfolio. Additionally, Starwood Property Trust expanded its Board of Directors, appointing Jonathan Pollack as Vice Chairman, who will also become President of Starwood Capital Group in 2025. Pollack's extensive background in real estate investment is expected to strengthen the company's leadership team. These recent developments reflect Starwood's ongoing efforts to solidify its position in the real estate and investment sectors.

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