Outfront (OUT) Amends Credit Agreement, Lowers Interest Rate

Outfront Media (NYSE:OUT) amended its credit agreement, lowering interest rate on its $670-million term loan by 0.25%. The term loan, due in 2024, is guaranteed by the company along with its wholly-owned subsidiaries, Outfront Media Capital LLC and Outfront Media Capital Corporation.

Subsequent to the amendment of the credit agreement (Jan 31, 2014), the company lowered interest rate margin on London Interbank Offered Rate (LIBOR) debt from 2.25% to 2%. The amendment also reduced the interest rate on base rate borrowings from 1.25% to 1%.

Per the amendment, if Outfront carries out any repricing transaction, clarification, conformation or other ministerial changes to the credit agreement on or before the completion of six months of the amendment, the company will be obligated to pay a pre-payment premium of 1% of the principal portion of the term loan to lenders.

Nonetheless, the remaining terms of the amended credit agreement, including terms related to defaults and loan acceleration, remained unchanged as compared with the terms under the existing credit agreement.

Encouragingly, Outfront’s third-quarter 2017 adjusted funds from operations (FFO) per share of 56 cents were in line with the Zacks Consensus Estimate. Results were backed by higher local sales across billboard and transit, benefit from acquired digital billboards in Canada, as well as conversion of static billboards to digital.

In fact, the company exited third-quarter 2017 with solid liquidity. Outfront’s liquidity position comprised cash of $42.0 million, as well as $428.3 million of availability under its $430.0 revolving credit facility, net of $1.7 million of issued letters of credit against the revolving credit facility.

The decrease in interest rate is anticipated to reduce the company’s annualized interest expense significantly. The move will improve the company’s cash flow and alleviate its bottom line pressure. This reduction offers greater financial flexibilityand will strengthen Outfront’s balance sheet.

However, amid soft market concerns, shares of this Zacks Rank #3 (Hold) stock have underperformed the industry it belongs to, year to date. The company’s shares have lost 3.5% as against the industry’s growth of 6.7%.

Further, the Zacks Consensus Estimate for FFO per share for the full year was revised downward to $1.98 over a week.

Stocks to Consider

Some better-ranked stocks in the REIT space are Cedar Realty Trust (NYSE:CDR) , Urstadt Biddle Properties (NYSE:UBA) and DCT Industrial Trust (NYSE:DCT) . All three stocks carry a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Cedar Realty’s FFO per share estimates for 2017 remained unchanged at 54 cents over a month.

Urstadt Biddle Properties’ 2017 FFO per share estimates have remained unchanged at $1.25 over the past 60 days.

DCT Industrial Trust’s current-year FFO per share estimates have been revised upward by a cent to $2.44 in a month’s time.

Note: All EPS numbers presented in this write up represent funds from operations (FFO) per share. FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

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