Public Storage Dashes to Bond Market After M&A
Public Storage, a real estate investment trust (REIT) that specializes in self-storage, recently became the latest company to rush to the bond market after a major merger and acquisition (M&A). The company is looking to raise $1.5 billion in debt to finance its purchase of rival Life Storage Inc.
Public Storage’s Acquisition of Life Storage
Public Storage announced in April that it had agreed to acquire Life Storage for $5.7 billion. The deal is expected to close in the third quarter of 2023. The acquisition will make Public Storage the largest self-storage company in the United States, with more than 2,500 locations across the country.
The acquisition is part of Public Storage’s strategy to expand its presence in the self-storage market. The company has been on a buying spree in recent years, acquiring smaller rivals such as Shurgard Self Storage and CubeSmart.
Public Storage’s Rush to the Bond Market
Public Storage is now looking to the bond market to finance its acquisition of Life Storage. The company is planning to issue $1.5 billion in debt, which will be used to pay for the purchase.
The bond offering is expected to be completed by the end of August. Public Storage has already received strong interest from investors, with the bonds being oversubscribed.
Rising Demand for Corporate Bonds
Public Storage’s rush to the bond market is part of a larger trend of companies tapping the debt markets to finance M&A activity. Corporate bond issuance has been on the rise in recent months, as companies look to take advantage of low interest rates and strong investor demand.
The surge in corporate bond issuance has been driven by a number of factors. Companies are looking to take advantage of low interest rates, which have been driven down by the Federal Reserve’s monetary policy. At the same time, investors have been eager to buy corporate bonds, as they offer higher yields than other types of investments.
Risks of Corporate Bond Issuance
While corporate bond issuance can be a useful tool for financing M&A activity, it also carries some risks. Companies that issue bonds are taking on additional debt, which can increase their financial leverage and make them more vulnerable to economic downturns.
In addition, corporate bonds are subject to market risk. If interest rates rise, the value of the bonds could decline, resulting in losses for investors.
Conclusion
Public Storage’s rush to the bond market is part of a larger trend of companies tapping the debt markets to finance M&A activity. The company is looking to raise $1.5 billion in debt to finance its purchase of rival Life Storage Inc. The bond offering is expected to be completed by the end of August, and has already received strong interest from investors. While corporate bond issuance can be a useful tool for financing M&A activity, it also carries some risks. Companies that issue bonds are taking on additional debt, which can increase their financial leverage and make them more vulnerable to economic downturns.