Ladder Announces Pricing of $500 Million Senior Notes Offering

Rhea-AI Summary

Ladder Capital Corp (NYSE: LADR) announced the pricing of a private offering of $500 million in 7.000% Senior Notes due 2031. The sale is expected to complete around July 5, 2024, subject to customary closing conditions. The Notes will be senior unsecured obligations of Ladder and guaranteed by its wholly-owned domestic subsidiaries. The proceeds will be used to repay certain secured debts and for general corporate purposes. Moody’s affirmed Ladder’s Ba1 rating, upgrading the Notes to Ba1, while Fitch and S&P Global Ratings both affirmed and revised their ratings to a positive outlook.

Positive

• Pricing of $500 million in 7.000% Senior Notes due 2031.
• Proceeds will be used to repay certain existing secured debt and for general corporate purposes.
• Moody's affirmed Ba1 rating with a positive outlook.
• Fitch Ratings affirmed BB+ rating with a positive outlook.
• S&P Global Ratings raised issuer credit and issue ratings to BB with a stable outlook.

Negative

• Senior Notes are unsecured obligations, potentially increasing risk.
• Offering not registered under the Securities Act, limiting sale options.

Insights

Financial Analyst

Ladder Capital Corp's announcement of a $500 million Senior Notes offering, with a 7.000% interest rate due in 2031, is a significant financial move aimed at refinancing existing debt and funding general corporate purposes. The intent to repay earlier secured debts with part of these proceeds indicates a strategy towards optimizing their balance sheet and reducing leverage, which can be beneficial in terms of lowering interest costs over time.

From an investment perspective, the affirmation of ratings by Moody's, Fitch and S&P Global suggests confidence in Ladder's creditworthiness and overall financial health. The revisions in outlooks to positive from these rating agencies add a layer of credibility to this financial maneuver, showing that Ladder is on a potentially upward trajectory in terms of credit quality. The Ba1 and BB ratings, while still considered non-investment grade, reflect a higher tier within the speculative grade category, pointing to relatively low credit risk for this type of debt.

It's also worth noting the 7.000% interest rate. For retail investors, this might imply higher expenses for Ladder in paying interest. However, given the current macroeconomic environment with rising interest rates, this rate appears reasonable and competitive. Investors should watch how efficiently Ladder deploys the remaining proceeds designated for general corporate purposes, as it will directly impact future performance and stability.

Credit Risk Analyst

The issuance of $500 million in Senior Notes at a 7.000% interest rate due 2031 introduces both risks and opportunities for Ladder Capital Corp. From a credit risk perspective, the primary benefit lies in the improved liquidity and potential for debt restructuring. By replacing existing secured debt with unsecured notes, Ladder could enhance its flexibility and potentially access additional capital in the future without the need for collateral.

However, the unsecured nature of these notes implies a subordinate recovery rate in case of financial distress compared to secured debt. Investors should be aware that while ratings have been affirmed and even upgraded, the notes remain in the speculative grade. The revised outlook to positive by rating agencies signals confidence but doesn't eliminate the inherent credit risks associated with non-investment grade securities.

Furthermore, the affirmations and upgrades by Moody's, Fitch and S&P indicate that the company's financial management strategies are being well-received, but it is important to monitor how Ladder manages its debt load and executes its corporate strategies moving forward. The allocation of proceeds towards general corporate purposes requires careful scrutiny to ensure it doesn't lead to inefficient use of capital, which could negatively impact the credit profile.

NEW YORK--(BUSINESS WIRE)-- Ladder Capital Corp (“Ladder,” the “Company,” “we” or “our”) (NYSE: LADR) announced today that its subsidiaries, Ladder Capital Finance Holdings LLLP (the “Issuer”) and Ladder Capital Finance Corporation (the “Co-Issuer” and collectively with the Issuer, the “Issuers”), have priced a private offering of $500 million in aggregate principal amount of 7.000% Senior Notes due 2031 (the “Notes”). The sale of the Notes is expected to be completed on or about July 5, 2024, subject to customary closing conditions. The Notes will be the Issuers’ senior unsecured obligations and will be guaranteed on a senior unsecured basis by the Company and each of the Issuers’ wholly owned domestic subsidiaries that guarantees the Issuers’ outstanding notes.

The Issuers intend to use a portion of the net proceeds of this offering to repay certain existing secured indebtedness, with the remaining net proceeds to be used for general corporate purposes. Moody’s Ratings has affirmed the Ba1 long-term corporate family rating of the Company with outlook revised to positive and upgraded the backed senior unsecured notes ratings of the Issuer to Ba1. Fitch Ratings affirmed the long-term issuer default ratings and senior unsecured debt ratings of the Issuers at BB+ and revised the rating outlook to positive. S&P Global Ratings raised its issuer credit and issue ratings on the Issuer and the Issuer’s senior unsecured notes to BB with a stable outlook.

The Notes were offered to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and to non-U.S. persons outside the United States pursuant to Regulation S under the Securities Act. The Notes have not been registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements. This press release does not constitute an offer to sell the Notes or a solicitation for an offer to purchase the Notes.

About Ladder

Ladder Capital Corp is an internally-managed commercial real estate investment trust with $5.3 billion of assets as of March 31, 2024. Our investment objective is to preserve and protect shareholder capital while producing attractive risk-adjusted returns. As one of the nation’s leading commercial real estate capital providers, we specialize in underwriting commercial real estate and offering flexible capital solutions within a sophisticated platform.

Ladder originates and invests in a diverse portfolio of commercial real estate and real estate-related assets, focusing on senior secured assets. Our investment activities include: (i) our primary business of originating senior first mortgage fixed and floating rate loans collateralized by commercial real estate with flexible loan structures; (ii) owning and operating commercial real estate, including net leased commercial properties; and (iii) investing in investment grade securities secured by first mortgage loans on commercial real estate.

Founded in 2008, Ladder is run by a highly experienced management team with extensive expertise in all aspects of the commercial real estate industry, including origination, credit, underwriting, structuring, capital markets and asset management. Members of Ladder’s management and board of directors are highly aligned with the Company’s investors, owning over 11% of the Company’s equity. Ladder is headquartered in New York City with regional offices in Miami, Florida and Los Angeles, California.

Forward-Looking Statements

Certain statements in this release may constitute “forward-looking” statements, including those regarding the Notes offering and the intended use of proceeds from the Notes offering. These statements are based on management’s current opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or future results. These forward-looking statements are only predictions, not historical fact, and involve certain risks and uncertainties, as well as assumptions. Actual results, levels of activity, performance, achievements and events could differ materially from those stated, anticipated or implied by such forward-looking statements. While Ladder believes that its assumptions are reasonable, it is very difficult to predict the impact of known factors, and, of course, it is impossible to anticipate all factors that could affect actual results on the Company’s business. There are a number of risks and uncertainties that could cause actual results to differ materially from forward-looking statements made herein including, most prominently, market factors affecting the Notes offering and the risks discussed under the heading “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, as well as its consolidated financial statements, related notes, and other financial information appearing therein, and its other filings with the U.S. Securities and Exchange Commission. Such forward-looking statements are made only as of the date of this release. Ladder expressly disclaims any obligation or undertaking to release any updates or revisions to any forward-looking statements contained herein to reflect any change in its expectations with regard thereto or changes in events, conditions, or circumstances on which any such statement is based.

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Ladder Capital Corp Investor Relations

917-369-3207

investor.relations@laddercapital.com

Source: Ladder Capital Corp

FAQ

What is the amount of Ladder Capital's recent Senior Notes offering?

$500 million.

What is the interest rate for Ladder Capital's 2031 Senior Notes?

7.000%.

When is the expected completion date for Ladder Capital's Senior Notes sale?

Around July 5, 2024.

What will Ladder Capital use the proceeds from the Senior Notes offering for?

To repay certain secured debts and for general corporate purposes.

What is the Moody’s rating for Ladder Capital's new Senior Notes?

Ba1.

What are the ratings given by Fitch for Ladder Capital's Senior Notes?

BB+ with a positive outlook.

How has S&P Global Ratings rated Ladder Capital's issuer credit and issue?

BB with a stable outlook.