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CommonWealth REIT declared a public offering of 27 million shares. Further, the company anticipates that the underwriters will be provided a 30-day option to buy up to an additional 4 million common shares.

The proceeds from the offering will be primarily utilized to redeem nearly $450 million worth of unsecured notes due between 2014 and 2016. CommonWealth announced this in a tender offer issued concurrently. Further, the remainder of proceeds will be used for repaying other debt and for general business purposes.

The joint book-running mangers for the offering are Citigroup Inc. (C - Analyst Report), Merrill Lynch – a wing of Bank of America Corporation (BAC - Analyst Report), Morgan Stanley (MS - Analyst Report) and UBS Investment Bank. Further, Jefferies Group, Inc. and RBC Capital Markets are acting as joint lead managers for the offering.

Earlier in 2012, CommonWealth had announced a public offering of $175 million of 5.75% unsecured senior notes due Aug 1, 2042. The proceeds from these were utilized for redeeming 6 million shares of 7 1/8% Series C Cumulative preferred shares and partially funded the acquisitions completed in the third quarter of 2012.

For CommonWealth, though the public offering would result in share dilution, the repayment of debt is encouraging, as it would reduce interest expenses. In 2012, interest expenses (including net amortization of debt discounts and deferred financing fees) were $204.2 million, up 4.7% year-over-year. Further, as of Dec 31, 2012, senior unsecured debt was nearly $3.0 billion, rising 4.5% from Dec 31, 2011.

Currently, CommonWealth retains a Zacks Rank #3 (Hold).


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