Grubb & Ellis Co. entered into definitive agreements with qualified institutional buyers and accredited investors to sell 900,000 shares of a new issuance of a 12% cumulative participating perpetual convertible preferred stock for $90 million in gross proceeds. The company has also granted the initial purchaser and placement agent a 45-day option to purchase up to an additional 100,000 shares of preferred stock. The closing of the transaction is expected to occur on or by Nov. 6.
Grubb & Ellis intends to use the offering proceeds to repay in full its credit facility at the agreed reduced principal amount equal to approximately 65% of the principal amount outstanding under such facility. The balance of the offering proceeds will be used for general working capital purposes and transaction costs. As part of the preferred stock offering, the $5 million subordinated loan provided on Oct. 2, to the company by an affiliate of its largest stockholder will be converted into the preferred stock at the offering price and accrued interest will be paid with respect to the subordinated loan.
"This is a transformational event for Grubb & Ellis. Upon closing, Grubb & Ellis will be one of the stronger capitalized companies in the real estate services industry," said C. Michael Kojaian, the company's chairman and largest stockholder. "We are extremely pleased with the demand for the security and the quality of the institutional investors attracted to the company."
"Upon completion of the transaction, the company will have a much improved balance sheet, with minimal debt obligations and additional working capital to fund our growth initiatives," said Richard W. Pehlke, executive vice president and chief financial officer. "This positions us well to build on the strengths of our service and investment capabilities with increased operating flexibility."
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