Partner's Reit gets creative financing
Partner's Reit used to trade in the $6 to $7 price range but a large deal that would have taken 20% of it 's equity fell through and it hasn't yet recovered.In fact, in March, April and May the stock was trading at the $3.70 to $3.75 price range.But it needed to redeem two convertible subordinated debentures that were coming due soon.If the debentures were converted to common shares this would increase their common shares and dilute earnings.So they needed creative financing and they came up with a Right's Offering.
The Right's Offering
On May19 PAR announced it's rights issue;there would be 11.5 million units and the proceeds would be $35.5 million. The price would be around $3.10 per share.When it was finished Partner's Reit would have 45.7 million shares.The right's offering closed on July19 and was fully subscribed.In fact,it was oversubscribed by 33%.The proceeds will be used to redeem $17.25 million of convertible debentures(Series II) and 67% of or almost $8 million of Series III convertible debentures.The remaining $12 million will be used for corporate purposes.
Partner's Reit also announced that McCowan and Associates had purchased 2.5 million units at the offering price to hold 20% of the shares.Mr. McCowan was a past CEO of Partner's and almost engineered a blockbuster of a deal to acquire 3 Ontario plazas from a numbered Ontario company.This blog feels that Mr. McCowan could be a stabilizing influence on future Partner's activities
After the Right's Offering
Overall this has been a successful rights offering but a lot of shares have been bought at $3.10 per share.This should keep the price in the $3.10 to $3.25 area until close to Thanksgiving.But the threat of converting the debentures has been removed.On the other hand,this transaction has put a significant block of shares in the old CEO's hands.This may help to give PAR a new and more profitable direction.This blog calls for PAR to spend more time on cutting costs and improving it's margins.At the same time realizing that it has shown shareholders that it still has good demand for further rights in the future.
The Right's Offering
On May19 PAR announced it's rights issue;there would be 11.5 million units and the proceeds would be $35.5 million. The price would be around $3.10 per share.When it was finished Partner's Reit would have 45.7 million shares.The right's offering closed on July19 and was fully subscribed.In fact,it was oversubscribed by 33%.The proceeds will be used to redeem $17.25 million of convertible debentures(Series II) and 67% of or almost $8 million of Series III convertible debentures.The remaining $12 million will be used for corporate purposes.
Partner's Reit also announced that McCowan and Associates had purchased 2.5 million units at the offering price to hold 20% of the shares.Mr. McCowan was a past CEO of Partner's and almost engineered a blockbuster of a deal to acquire 3 Ontario plazas from a numbered Ontario company.This blog feels that Mr. McCowan could be a stabilizing influence on future Partner's activities
After the Right's Offering
Overall this has been a successful rights offering but a lot of shares have been bought at $3.10 per share.This should keep the price in the $3.10 to $3.25 area until close to Thanksgiving.But the threat of converting the debentures has been removed.On the other hand,this transaction has put a significant block of shares in the old CEO's hands.This may help to give PAR a new and more profitable direction.This blog calls for PAR to spend more time on cutting costs and improving it's margins.At the same time realizing that it has shown shareholders that it still has good demand for further rights in the future.
Partner's Reit only has a market capitalization of $145 million and has shown small reits ,in the industry, that rights is one avenue open to small reits to raise new equity.This rebuilding of it's capital structure has opened the door for a future round of fairly inexpensive debt.
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