Lennar Corp. has upsized its senior debt offering to $350 million and priced it at a 3.25% interest rate. It first proposed selling $300 million in debt. The over-allotment for the offering was also increased to $50 million from $45 million.
Possible use of the proceeds includes purchasing distressed portfolios of mortgage loans and foreclosed real estate for its Rialto Investments unit; in addition, they are expected to be used for the repayment or repurchase of other debt and land acquisitions.
The notes will be convertible at the option of the holders into Lennar Class A common stock at the rate of 42.5555 shares for each $1,000 principal amount of debt, which equates to $23.50 per share.
On Nov. 22, Lennar closed at $17.09 per share.
Prior to the pricing announcement, Fitch Ratings said it would give the notes a "BB+" rating, which is below investment grade (which is BBB). Lennar has $268 million of debt maturing in March 2013 and another $250 million in September 2014.
Fitch expects the company to have to access the capital markets to refinance that debt, but it added Lennar has shown it can access the markets during times of distress.
As for Rialto, Fitch said it is "strategically material to the company's operation, particularly as housing activity remains at absolute low levels."
