August 23, 2010 / 5:12 PM / 9 years ago

UPDATE 1-iStar proposes to extend 2nd lien loans - sources

* iStar proposes to extend second lien debt by three years

* Will allow repurchase of second lien loans

* Plans to make $500 million paydown on first lien loan (Adds bullet points, details, terms of restructuring)

By Jacqueline Poh

NEW YORK, Aug 23 (RLPC) - Commercial real estate lender iStar Financial SFI.N is asking to extend its second lien term loans due 2011 and 2012 and is offering higher spreads on the extended loans, sources told Thomson Reuters LPC.

The company is amending its first and second lien loans under a restructuring proposal that is advised by Lazard.

In a presentation to lenders, the company said it is “facing significant debt maturities,” and wants to work with them to extend $2.6 billion of second priority loans, which would consist of a $1.7 billion second priority loan due June 2011 and a $0.9 billion second priority loan due 2012.

The 2011 loan is proposed to be extended to June 2014 with a spread of 300 basis points (bps) over LIBOR, increased from the existing 150 bps over LIBOR. The 2012 loan is being extended to June 2015 with a spread of 350 bps over LIBOR, increased from the existing 200 bps over LIBOR.

iStar is also asking to repurchase its second lien loans at a discount of not less than 10 percent of the aggregate principal amount repurchased.

Meanwhile, the company is planning to make a $500 million paydown on its first lien loan due June 2012. The remaining $500 million first lien loan will maintain the same maturity and pricing of 250 bps over LIBOR.

No amendment fee is offered. The company’s unsecured lenders are not notified of the amendment; only the first and second lien lenders are involved.

Last month, the company was reported to be mulling a restructuring or refinancing of its roughly $3 billion of debt due next year. A source familiar with the matter said, “The company will need 100 percent consent from existing lenders to make any changes to existing credit agreement to accommodate the debt restructuring or refinancing.”

According to LPC data, iStar amended its credit facility in March 2009 to extend $1.695 billion of syndicated loans to June 2011 and add a new $1 billion term loan due June 2012. JP Morgan, Bank of America Merrill Lynch and Citi are leads on the deal.

Meanwhile, sources pointed out that the company has an additional $2 billion of debt due 2012 in addition to a $500 million paydown needed this September, and some sizable bond maturities over the next two years. (Reporting by Jacqueline Poh)

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