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13 thoughts on “Safehold and Istar Merging”

  1. Any idea why they would limit redemption of the series D to proceeds from capital stock (swap equity for equity)? Were they trying to reassure investors that they wouldn’t use operating cash for that purpose? On the other hand, If so, why only that particular series?

    1. Wow, that was fast…. especially for a rating agency… lol… of course if this all goes as planned it’ll be a moot upgrade at least for the unsecured debt as STAR or the New Safehold won’t have any… Thanks for posting..

  2. Tim – adding to the confusion surrounding what’s to happen in this merger there are apparently two separate investor presentations, one for SAFE holders and one for STAR. This is the STAR presentation – https://ir.istar.com/static-files/c99137c0-57c1-4265-939d-daf1d6fa59d8

    The different wording in these tw makes it all the more difficult to figure out just what’s to happen with STAR preferreds.

    BTW, I do not own any STAR preferreds but do own some common and a lot of the 3 unsecured debt issues

    1. 2wr–well I guess we will wait and see. If they remain outstanding I don’t think holders would mind with 7.50 to 8% coupons.

    2. 2WR – I don’t own any of this but my quick read shows BOTH presentations say the exact same things

      iStar will:
      Retire Liabilities & Preferred Equity
      In connection with the merger, iStar will retire its
      outstanding third-party debt (other than its $100m
      Trust Preferred) and cash out its preferred equity
      iStar will settle long-term incentive plan (iPIP) using
      its existing shares of SAFE, reinforcing management
      alignment with New Safehold’s success

      That seems quite clear to me, not sure why there would be any confusion. Just my two cents as I don’t have a stake in these issues

    3. Thanks, 2WR.

      I’m wondering what different wording you found that implies any uncertainty about the fate of the STAR preferreds.
      I found some identical text in both presentations. It appears from both that they plan to redeem the three STAR preferreds.
      In each presentation is the following text:
      1. Transaction Execution.
      iStar will “… retire its outstanding third-party debt (other than its $100m Trust Preferred) and cash out its preferred equity.”
      2. Appendix: Transaction Summary (Merger of iStar and Safehold section) .
      “iStar will retire all indebtedness and preferred equity and settle its long-term incentive plan obligations prior to the merger.”

      Also, the iStar presentation has an “iStar to SpinCo Bridge” (page 12) section, showing that the transaction will reduce iStar’s $300mm of preferred equity to $0. iStar’s most recent 10-Q shows it has ~$300mm total of preferred equity (STAR-D, -G, and -I).


      1. What seemed confusing was their reference to “trust preferreds” as opposed to just preferreds and wondering what that meant and why the amount didn’t coincide with the amounts outstanding…. Looking further I see where they have a separate line for preferreds that matches up with the amount of preferreds outstanding, so I think you’re right – it’s pretty clear what the plan will be and that will be redeeming the preferreds…

        The other confusing info I found had to do with the debt not the preferred as one area said that SAFE would assume the debt where another said STAR would redeem it….. Without now looking further into those details, ,I’m guessing that meant SAFE will assume STAR’s secured debt but the unsecured debt, the 3 issues I own, will all be redeemed…. I think they all get redeemed at premium prices, some possibly under make whole provisions.

        1. Thanks, 2WR.

          I too was/am confused with “trust preferred” when it refers to debt. I see it now in Note 10 (Debt Obligations, net) of the 10-Q.

        2. 2WR:

          Here is the quick math:

          As of 6/30/22, STAR had $1.86B in total debt, with $1.76B being the unsecured notes. The $100M in trust preferred securities due in 2035 that pay LIBOR +150 bps are being assumed by SAFE.

          So as of 6/30/22 STAR had $1.4B of cash and $1.76B in unsecured debt (after SAFE assuming $100M). $305M in equity preferreds.

          But STAR owned $1.8B in SAFE shares, or 40+ million shares that trade for $45+. $400M of those shares will go to the new STAR SpinCo. STAR is selling $200M in those SAFE shares to Michael Dell’s investment arm to further pay down debt. Another $170+M of their SAFE shares will be used to settle long-term management obligations to SAFE.

          That leaves $1.03B leftover in its SAFE holdings to cover the remaining $160M in unsecured debt obligations and $305M in equity preferreds. So they can easily pay off both of them.

          After doing so, it seems the remaining SAFE shares held by STAR will be assimilated into the new SAFE:

          “At closing, the shares of SAFE owned by iStar will be retired and each share of SAFE not owned by iStar will be exchanged for one share of common stock of New Safehold.”

          I was able to buy a little more STAR+I today below $25, but I already had a very full position. Will truly shed a tear when these preferreds go by the wayside. I have tax lots as low as $15/share. Hoping they make it to 2023!

          1. Thanks for the math summary, Rob…. Yes with a little bit more assimilation time it does all make sense and add up – except for the market reaction in price of STAR itself…. I sure don’t understand that.

            Yes the preferreds have been unscathed throughout all crises even though in ’09 they as a group all traded down into the 2’s…. That’s when I first got involved with STAR and have followed them ever since… Back then, I did a little more Gridding and Martin G’ing and traded in and around all 5 of them for a long time…. It was fun but I sold out on them way before these par-ish numbers and decided to go up the corporate ladder to the debt where most of my exposure is… That’ll work out just fine if this goes thru with all 3 having to be called at various premiums….

            Speaking of the 10Q and with your eye toward the preferreds did you happen to notice in Note 13 where it describes a call feature for G and I but not D? “The Company may, at its option, redeem the Series G and I Preferred Stock, in whole or in part, at any time and from time to time, for cash at a redemption price equal to 100% of the liquidation preference of $25.00 per share, plus accrued and unpaid dividends, if any, to the redemption date.” That seemed odd and I wonder how that might affect what happens to D… I seem to remember D had some special features that included having voting rights that the others didn’t have and a provision that said something like it could only be called thru proceeds of another preferred issue… I know it’s been discussed here before a long long time ago… Gridland territory too as I remember…. I wonder if D’s going to have to be treated slightly differently…..

            1. 2WR, they can be redeemed its just a bit differently as you stated. In their annual filings they deliberately omit D and dont mention it.
              The Company may, at its option, redeem the Series G and I Preferred Stock, in whole or in part, at any time and from time to time, for cash at a redemption price equal to 100% of the liquidation preference of $25.00 per share, plus accrued and unpaid dividends, if any, to the redemption date.
              But….in actual prospectus link from annual filings it can be done…
              Limitations on Redemption.

              (i) The redemption price of the Series D Preferred Stock (other than the portion thereof consisting of accrued and unpaid dividends) is payable solely out of the sale proceeds of other capital stock of the Corporation, which may include other series of Preferred Stock, and from no other source. For purposes of the preceding sentence, “capital stock” means any equity securities (including Common Stock and Preferred Stock), shares, interest, participation or other ownership interests (however designated) and any rights (other than debt securities convertible into or exchangeable for equity securities) or options to purchase any of the foregoing.

              (ii) Unless full cumulative dividends on all shares of Series D Preferred Stock shall have been, or contemporaneously are, declared and paid or declared and a sum sufficient for the payment thereof set apart for payment for all past dividend periods and the then current dividend period, no shares of Series D Preferred Stock shall be redeemed unless all outstanding shares of Series D Preferred Stock are simultaneously redeemed, and the Corporation shall not purchase or otherwise acquire directly or indirectly any shares of Series D Preferred Stock (except by exchange for capital stock of the Corporation ranking junior to the Series D Preferred Stock as to dividends and upon liquidation); provided, however, that the foregoing shall not prevent the purchase by the Corporation of shares transferred to a Charitable Trust pursuant to Article IX in order to ensure that the Corporation remains qualified as a REIT for Federal income tax purposes or the purchase or acquisition of shares of Series D Preferred Stock pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding shares of Series D Preferred Stock.

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