EPR Properties turned to the convertible market to refinance debt coming due next month, selling $500 million of notes that give buyers a shot at its stock.
The Kansas City real-estate investment trust, which owns theaters, ski resorts, water parks and other experiential properties, priced 4.5% convertible senior notes due February 2032 late Wednesday in a private offering to institutional buyers. The initial purchasers can take up to $75 million more within 13 days. The deal was sized as proposed on Tuesday and settles on Nov. 16.
Terms
The notes convert at 14.6441 shares per $1,000, or about $68.29 a share, a 15% premium to EPR’s closing price of $59.38 on Wednesday. Holders can convert freely from October 2031, and only on certain events before that. EPR will pay cash for the principal and can settle any excess in cash, stock or both. Interest is paid twice a year starting in August 2027.
The premium is well below the 27.5% and 40% that Akamai got on its converts this week, which is typical for a REIT with a high dividend and steadier shares. It still gives EPR cheaper money than the 5% the Treasury paid for 10-year funds this week.
Uses of proceeds
EPR expects net proceeds of about $485.7 million. It will spend about $18.5 million on capped calls that reduce dilution if the notes convert and about $50 million to repurchase 842,034 of its shares in private trades at pricing. The rest, together with cash on hand, will repay in full $450 million of 4.75% senior notes that mature on Dec. 15. The trade swaps maturing straight debt for a slightly lower coupon and a longer runway, at the cost of potential dilution if the stock climbs past the conversion price.
