Corvex Management LP and Related Cos., the investors who want to replace CommonWealth REIT’s board, pledged to buy a majority of the debt in the company’s credit agreements to prevent acceleration of the loans’ maturity should they be successful in ousting the trustees.
The stockholders said they’ll offer to buy 51 percent of the outstanding debt under CommonWealth’s revolving credit agreement and its term loan at par to prevent the acceleration of repayments. The pledge is being made to “alleviate any shareholder concern” over the debt issue, Corvex and Related said today in a statement.
“Since no such acceleration will occur, cross-acceleration provisions included in other CommonWealth debt obligations will not be triggered and should be of no concern to shareholders,” Corvex and Related, the second-largest investors in the Newton, Massachusetts-based real estate investment trust, said in the statement.
Corvex, founded by activist investor Keith Meister, and Related, a New York-based property developer, are soliciting votes to remove the trustees, claiming that an overlap in board membership and the ownership of an external management firm has led to conflicts of interest and mismanagement at the REIT. The dispute between the investors and the company is in arbitration. CommonWealth has claimed the solicitation isn’t valid, and urged stockholders on June 17 to take no action on it.
Tim Bonang, a CommonWealth spokesman, didn’t immediately respond to a request for comment on the investors’ debt offer.
CommonWealth’s credit rating was lowered to junk on June 10 by Standard & Poor’s, which cited concerns about the ability of management “to improve the competitive positioning of its office portfolio given weak office market conditions.” The REIT was cut to BB+ from BBB-.