Highwoods Prices Notes to Reduce Debt - Analyst Blog

In order to boost its liquidity position, Highwoods Properties Inc. (NYSE: HIW) disclosed the pricing of 3.20% senior unsecured notes worth $300 million, due Jun 15, 2021. Particularly, the company's operating arm, Highwoods Realty Limited Partnership has priced the notes to yield 3.363% and the company expects to use the proceeds from this for reducing outstanding amount under its $475 million revolving credit facility and other corporate needs.

A consortium of reputed financial institutions is assisting Highwoods as joint book-running managers in this offering. Among these are Wells Fargo Securities, LLC of Wells Fargo & Company (NYSE: WFC), U.S. Bancorp Investments, Inc. of U.S. Bancorp (NYSE: USB) and Mitsubishi UFJ Securities (NYSE: USA) of Mitsubishi UFJ Financial Group, Inc. (NYSE: MTU).The offering will close on May 27, 2014, upon fulfillment of customary closing conditions.

For Highwoods, whose cash position stood at $13.3 million as of Mar 31, 2014, the aforementioned notes offering is a strategic fit as it will lower debt and consequently the interest expenses. Also, the increased financial flexibility will enable Highwoods to pursue its portfolio enhancement activity that will strengthen its top line.

Last month, Highwoods declared first-quarter 2014 core funds from operations (FFO) of 66 cents per share, missing the Zacks Consensus Estimate by a nickel and the prior-year quarter figure by 2 cents. Bad weather conditions and the company's retirement plan related expenses were the dampeners. Nevertheless, total revenue for the quarter jumped 13.9% year over year to $148.5 million and came above the Zacks Consensus Estimate of $148 million.

Currently, Highwoods carries a Zacks Rank #3 (Hold).

Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

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