By Jennifer Chiou
New York, Oct. 23 - Grubb & Ellis Co. announced that the company has entered into definitive agreements with qualified institutional buyers and accredited investors to sell 900,000 shares of new 12% cumulative participating perpetual convertible preferred stock for $90 million in proceeds.
There is also an over-allotment option giving the agent 45 days to purchase up to an additional 100,000 preferreds.
JMP Securities is the initial purchaser and placement agent.
As part of the offering, the $5 million subordinated loan provided to the company on Oct. 2 by an affiliate of its largest stockholder will be converted into the preferred stock at the offering price. Accrued interest will be paid on the subordinated loan.
"This is a transformational event for Grubb & Ellis," C. Michael Kojaian, the company's chairman and largest stockholder, said in a news release.
"Upon closing, Grubb & Ellis will be one of the stronger capitalized companies in the real estate services industry."
The company intends to immediately seek stockholder approval to amend its certificate of incorporation to, among other things, increase its authorized capital.
If stockholder approval is obtained, each preferred will be convertible into 60.606 common shares, equivalent to a conversion price of $1.65 per common share. This is a 10% premium to the closing price of the company's common stock on Thursday.
Closing is slated for Nov. 6.
Proceeds will be used to repay in full the company's credit facility at the agreed reduced principal amount equal to roughly 65% of the outstanding amount under the loan. Remaining proceeds will be used for general working capital purposes and transaction costs.
Grubb & Ellis said that although this transaction would normally require approval of the company's stockholders according to the rules of the New York Stock Exchange, the NYSE shareholder approval policy provides an exception in those cases where the delay in securing stockholder approval would seriously jeopardize the financial viability of the listed company.
In accordance with the NYSE rule, the audit committee of the company's board of directors has approved of the company's reliance on the exception.
Grubb & Ellis is a Santa Ana, Calif.-based real estate services and investment firm.
| Issuer: | Grubb & Ellis Co.
|
| Issue: | Cumulative participating perpetual convertible preferred stock
|
| Amount: | $90 million
|
| Greenshoe: | $10 million
|
| Agent: | JMP Securities
|
| Dividends: | 12%
|
| Price: | Par of $100
|
| Conversion ratio: | 60.606
|
| Conversion price: | $1.65
|
| Conversion premium: | 10%
|
| Pricing date: | Oct. 23
|
| Settlement date: | Nov. 6
|
| Stock symbol: | NYSE: GBE
|
| Stock price: | $1.50 at close Oct. 22
|
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