Data Center Owner Dupont Fabros Technology Sells a New Preferred Issue
By: Tim McPartland,
Dupont Fabros Technology (NYSE:DFT), a REIT and data center owner, has issued a new preferred stock with a coupon of 6.625%. The issue has the standard preferred stock terms–it is cumulative and redeemable at the companies option in about 5 years.
This issuance is what we call a refinancing issue as the company is going to use the proceeds to purchase other outstanding preferred issues that have a higher coupon. The shares to be redeemed are the balance of the DFT-A shares, a preferred issue with a coupon of 7.875%, which is to be partially redeemed on 5/27/2016. Additionally the company will purchase shares in the DFT-B issue, which is a 7.625% coupon issue. It is likely they will purchase just a portion of the DFT-B issue as they will not have adequate funds from the new issue to complete a total refinancing.
With this transaction the company will save as much as $2-$3 million per year in dividend payments. Companies will refinance their preferred shares when they are able to save more than a ½% per year (except for very small issues where the transaction costs far outweigh the savings garnered).
The issue is junk rated with a B- from S&P and a Ba2 from Moody’s.
The new DFT issue will have a permanent ticker symbol of DFT-C, but has just started trading on the OTC Grey market under the temporary ticker symbol of DFTPP.
Details on the new issue can be found here.