Summary
Public Storage (PSA) announced a significant transaction on February 8, 2011, involving a $121 million loan to PS Business Parks, L.P. (the "Partnership"), a controlled subsidiary of PS Business Parks, Inc. Public Storage holds a substantial indirect ownership stake of approximately 41% in PS Business Parks, Inc. This loan was strategically utilized by the Partnership to repurchase its preferred units at a discount to par, thereby reducing its outstanding preferred equity liabilities, and to fully repay its existing credit facility. The six-month loan carries an interest rate of LIBOR plus 0.85% and offers flexibility with early repayment options. This move by Public Storage demonstrates a proactive approach to financial management within its controlled entities. By facilitating the repurchase of preferred units at a discount, PSA is effectively deleveraging the Partnership and potentially enhancing shareholder value. The repayment of the credit facility also strengthens the Partnership's financial position and reduces its near-term debt obligations. Investors should view this as a positive step towards optimizing the capital structure and improving the financial health of PS Business Parks, which in turn can benefit Public Storage.
Key Highlights
- 1Public Storage (PSA) provided a $121 million loan to PS Business Parks, L.P. on February 8, 2011.
- 2The Partnership is a controlled entity of PS Business Parks, Inc., in which PSA holds a ~41% indirect ownership.
- 3Loan proceeds were used to repurchase preferred units of the Partnership at a discount to par.
- 4The loan also funded the full repayment of the Partnership's outstanding credit facility.
- 5The loan has a six-month term and can be repaid early.
- 6The interest rate on the loan is LIBOR plus 0.85%.