Newhall Land & Farming Repurchases Equity Units

Newhall Land & Farming Co., a Valencia real estate and agriculture concern, repurchased 5.2% of its equity units for $56 per unit, or $58.2 million. The units, which are similar to shares of stock, are traded on the New York Stock Exchange.

Meanwhile, Standard & Poor’s Corp., which had been considering cutting its rating of certain Newhall debt because of the buyback, instead left its BB+ rating intact.

S&P;’s ratings, which range from D (for near-default speculative issues) to AAA (for top investment-grade debt) help investors determine a borrower’s credit-worthiness and ability to repay the debt. If a company’s rating is lowered, the company might be forced to pay a higher interest rate to borrow money in the future.

In Newhall’s case, the company had offered to repurchase up to $112 million worth of its units, using $54 million of available cash and a new bank line of credit. S&P; was concerned that the additional borrowing would hinder Newhall’s ability to service all of its bills.

But because Newhall bought back only $58 million of its units, it required “minimal additional debt,” S&P; said. Even if Newhall had borrowed to buy back $112 million worth of its units, S&P; said, it would have affirmed the BB+ rating on the debentures because Newhall management “would have taken steps to quickly reduce” Newhall’s overall debt.