Shares of the real estate brokerage and title and escrow company Realogy Holdings (NYSE:RLGY) fell by nearly 10% at one point this morning after the company announced that it plans to raise $300 million in debt.
Realogy, which franchises brokerage brands such as Century 21, Coldwell Banker, and Sotheby’s International Realty, is proposing to issue $300 million of exchangeable senior notes that will come due in 2026 in a private offering.
Realogy also intends to grant the buyers of the notes a 13-day option to purchase up to an additional $45 million of notes. The company intends to use the proceeds to pay for the exchangeable note hedge transactions, working capital, and other general corporate purposes.
It’s a little interesting to see Realogy raising debt right now because in the company’s recent earnings report, Realogy boasted about strengthening its balance sheet and getting to its lowest ever net debt leverage ratio of 3.1 and senior secured leverage ratio of 0.64.
But Realogy is coming off a strong quarter of earnings in which it beat analysts’ estimates on profit and revenue. The company seems to be doing better and there could still be good demand in the mortgage market for a while, although I do still worry about the impact on the business if interest rates increase sooner than expected.
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