Apollo Commercial Prices Convertible Senior Notes - Analyst Blog

In order to attain financial flexibility, Apollo Commercial Real Estate Finance, Inc. ARI priced a public offering of 5.50% convertible senior notes worth $125 million. Additionally, the company granted a 30-day option to underwriters to buy at most $18.8 million of additional notes at offering price (excluding underwriters discount and including accrued interest).

The convertible senior notes, having an annual interest rate of 5.50%, will mature on Mar 15, 2019. Beginning on Sep 15, 2014, these are payable semiannually in arrears on Mar 15 and Sep 15 of every year.

The initial conversion rate of the senior notes will be equivalent to 55.3649 common shares per $1,000 principal amount of notes. The offering will close on or by Mar 17, 2014, upon fulfillment of customary closing conditions.

This commercial mortgage real estate investment trust (REIT) will use the expected proceeds of $125 million to pay off the outstanding amount under its repurchase facility with JPMorgan Chase Bank, N.A. of JPMorgan Chase & Co. JPM. Apollo Commercial will utilize the residual amount, if any, to buy planned assets such as commercial mortgage-backed securities, subordinate financings and other commercial real estate-related debts. 

We believe that this move will enable Apollo Commercial strengthen its balance sheet and pave way for making accretive investments going forward.

As a matter of fact, financial giants such as BofA Merrill Lynch of Bank of America Corp. BAC, J.P. Morgan and Citigroup Inc. C are assisting Apollo Commercial as joint book-running managers.

Apollo Commercial primarily acquires, invests, and manages debt instruments throughout the U.S. Over the years, the company has actively deployed capital in commercial real estate debt investments with attractive returns. As of Dec 31, 2013, cash and cash equivalents stood at $20.1 million. Also, the company had $161.2 billion in assets under management as of that date.

Apollo Commercial currently carries a Zacks Rank #3 (Hold).