Host Hotels Prices Senior Notes

The real estate investment trusts (REIT), Host Hotels & Resorts Inc. (HST - Analyst Report) recently announced that its sole general partner – Host Hotels & Resorts, L.P. – has priced a public offering of $400 million worth of 3.75% Senior Notes, maturing in 2023. The transaction is anticipated to be completed on Mar 28, subject to customary closing conditions.

Host Hotels expects to generate around $396 million (after deducting the underwriters’ discounts and estimated offering expenses) of net proceeds from the offering. The company intends to use the net proceeds, along with available cash in hand, to redeem all of Host L.P.'s $400 million worth of 9% Series T Senior Notes, slated to mature in 2017.

The offering involves a consortium of renowned banks acting as the joint book-running managers, including BofA Merrill Lynch of Bank of America Corporation (BAC - Analyst Report), J.P. Morgan (JPM - Analyst Report), Goldman, Sachs & Co. of The Goldman Sachs Group, Inc. (GS - Analyst Report) and Deutsche Bank Securities.

We believe this public offering will enable Host Hotels to attain financial flexibility and position it favorably to pursue investment opportunities and acquisitions, which will go a long way in enhancing its top-line growth.

Last month, Host Hotels came up with a strong fourth quarter 2012 results with adjusted FFO (funds from operations) per share of 40 cents, beating the Zacks Consensus Estimate by 3 cents. This also exceeded the year-ago adjusted FFO by 25%. The result came on the back of strong performance of the company’s operating properties.

As of Dec 31, 2012, Host Hotels had $417 million worth of cash and cash equivalents and $737 million available under its credit facility. The company also successfully executed its strategic aim of reducing cost of debt and extending debt maturities for strengthening the balance sheet. During 2012, Host Hotels issued $1.5 billion of debt with a weighted average interest rate of 3.7% and utilized the proceeds to repay $1.9 billion of debt with a weighted-average interest rate of 6.7%.

Host Hotels currently carries a Zacks Rank #3 (Hold).

Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.