HG bonds: Simon Property Group inks $1.5B for post-M&A refinancing; terms

Simon Property Group LP today completed a $1.5 billion public offering of SEC-registered senior notes in two parts, backing a broad refinancing effort in the wake of a recent acquisition.

The real estate investment trust intends to use the net proceeds of this offering to fund the planned optional redemption, via an embedded make-whole call provision, of its $550 million issue of 2.5% notes due July 15, 2021, according to regulatory filings. The company will use the remaining net proceeds for general corporate purposes, including to repay unsecured indebtedness. This includes indebtedness outstanding under its $4.0 billion senior unsecured revolving credit facility, its $2.0 billion senior unsecured delayed-draw term loan facility and/or the U.S. dollar-denominated indebtedness outstanding under its global unsecured commercial paper note program.

Simon reported $625 million outstanding under the revolver and $623 million of commercial paper borrowings as of Sept. 30, 2020. On Dec. 15, 2020, Simon drew down the full amount under its senior unsecured delayed-draw term loan facility to partially fund its acquisition of an 80% interest in The Taubman Realty Group Limited Partnership, the operating partnership through which Taubman Centers Inc. conducted its operations.

Last February, the company, ahead of the global pandemic declaration, announced initial terms for a planned acquisition of Taubman Center but scrapped the deal months later as lockdown dynamics settled over the retail landscape. The companies revived the deal late last year at a common equity cost, which Moody's assessed as slightly above $3.0 billion, or about $675 million below the initial terms.

Moody's in November said the revised merger agreement "is not expected to affect the REIT's ratings or outlook but would likely weaken its aggregate and secured leverage ratios." It said Simon's "sound liquidity position" — including $8.2 billion available under its credit facilities net of commercial paper outstanding, the $2.0 billion delayed-draw term loan at the end of the third quarter of 2020 and over $1.5 billion of cash, including the share of unconsolidated JVs — "provides significant financial flexibility."

Simon today locked in lower borrowing costs relative to notes it printed last summer, amid the forces driving that merger uncertainty. Last July, it priced $2 billion of notes in three parts for refinancing purposes, including a 2.65% 10-year tranche due July 15, 2030, at T+200. The 2030 issue changed hands today at a G-spread of 106 basis points as dealers shopped the new issues, which compares with T+125 a month ago, and T+175 ahead of the positive vaccine developments in November. Terms: