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Fortress to raise $200m in public stock offering

The publicly listed alternative investment firm will sell Class A shares to repay a portion of its outstanding debt as well as generate working capital that may be used to fund GP contributions to Fortress funds.

Fortress Investment Group plans to raise $200 million with an offering of 40 million Class A shares priced at $5 per share. Underwriters may purchase up to an additional 6 million shares to cover any over-allotments, the publicly listed firm said in a statement.

Fortress principals will not sell any shares in the offering, but rather expect to purchase up to $25 million or 10 percent of the shares sold.

Citi, JPMorgan, Merrill Lynch and Nomura Securities International will be the offering’s joint book runners.

The money raised will be used to pay down debt for the firm’s credit facilities, as well as for working general capital, which may include funding general partner contributions to Fortress funds.

Fortress said in its recent annual report it has a $75 million revolving credit facility and a $550 million term loan facility; as of 13 March 2009, the $550 million term loan was outstanding and $54 million was outstanding under the revolving credit facility in addition to $10 million of letters of credit that were outstanding under a letter of credit sub-facility.

According to Fortress’ 2008 annual report, the firm’s existing credit agreement mandates a $50 million payment in July 2009; $25 million in October 2009; $100 million during 2010, $75 million by January 2011; and the remainder paid at maturity in May 2012.

The firm’s share price has been making a comeback since dipping below the $1 mark in December and was sent soaring following a US Treasury announcement that the US government would provide generous leverage and matching equity amounts for private firms that purchase so-called toxic assets.

Fortress shares closed at $5.38 yesterday, giving the firm a $2.2 billion market capitalisation.