S&P rates Vornado convertibles BBB

Standard & Poor's said it assigned its BBB senior unsecured debt rating to the proposed $1.4 billion 2.875% convertible senior notes due 2027 to be issued by Vornado Realty Trust.

Purchasers have a 30-day over-allotment option for an additional $210 million of notes, the agency said, adding that the notes are being offered at 97.5% of par to yield 2.92% and proceeds are earmarked for general corporate purposes and to replenish Vornado's substantial war chest.

At the end of fiscal 2006, Vornado held nearly $2.6 billion in cash and marketable securities and leverage was 57% on a depreciated book value basis, the agency said.

The ratings on Vornado acknowledge a profitable and well-positioned core real estate portfolio, a previously underleveraged balance sheet and one of the REIT sector's strongest liquidity positions, the agency added.

These strengths provide Vornado's entrepreneurial management team with the flexibility to pursue more opportunistic investment activities relative to similarly rated peers and offset risks associated with comparably lower coverage measures, S&P said.

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