UPDATE 1-iStar proposes to extend 2nd lien loans – sources

* iStar proposes to extend second lien debt by three years

* Will allow repurchase of second lien loans

* Plans to make $500 million paydown on first lien loan
(Adds bullet points, details, terms of restructuring)

By Jacqueline Poh

NEW YORK, Aug 23 (RLPC) – Commercial real estate lender
iStar Financial (SFI.N: ) is asking to extend its second lien
term loans due 2011 and 2012 and is offering higher spreads on
the extended loans, sources told Thomson Reuters LPC.

The company is amending its first and second lien loans
under a restructuring proposal that is advised by Lazard.

In a presentation to lenders, the company said it is
“facing significant debt maturities,” and wants to work with
them to extend $2.6 billion of second priority loans, which
would consist of a $1.7 billion second priority loan due June
2011 and a $0.9 billion second priority loan due 2012.

The 2011 loan is proposed to be extended to June 2014 with
a spread of 300 basis points (bps) over LIBOR, increased from
the existing 150 bps over LIBOR. The 2012 loan is being
extended to June 2015 with a spread of 350 bps over LIBOR,
increased from the existing 200 bps over LIBOR.

iStar is also asking to repurchase its second lien loans at
a discount of not less than 10 percent of the aggregate
principal amount repurchased.

Meanwhile, the company is planning to make a $500 million
paydown on its first lien loan due June 2012. The remaining
$500 million first lien loan will maintain the same maturity
and pricing of 250 bps over LIBOR.

No amendment fee is offered. The company’s unsecured
lenders are not notified of the amendment; only the first and
second lien lenders are involved.

Last month, the company was reported to be mulling a
restructuring or refinancing of its roughly $3 billion of debt
due next year. A source familiar with the matter said, “The
company will need 100 percent consent from existing lenders to
make any changes to existing credit agreement to accommodate
the debt restructuring or refinancing.”

According to LPC data, iStar amended its credit facility in
March 2009 to extend $1.695 billion of syndicated loans to June
2011 and add a new $1 billion term loan due June 2012. JP
Morgan, Bank of America Merrill Lynch and Citi are leads on the
deal.

Meanwhile, sources pointed out that the company has an
additional $2 billion of debt due 2012 in addition to a $500
million paydown needed this September, and some sizable bond
maturities over the next two years.
(Reporting by Jacqueline Poh)

UPDATE 1-iStar proposes to extend 2nd lien loans – sources