iStar declines to pay $500 million on credit agreement

iStar Financial has announced today that it has elected not to pay down $500 million on its $1 billion first priority credit agreement. The company says this does not constitute a default and will not trigger interest rate changes on outstanding borrowing for this or other instruments. iStar said it may elect to pay the unpaid balance at any time, and that its available cash currently exceeds $500 million.

Five-year iStar credit defaults swaps are quoted at 22 ½ / 24 points upfront today. Yesterday saw rallying of IG9 equity tranches on the back of a move tighter of iStar from its wide prints, on market perception that a default by the company before June next year is now priced in. Fitch yesterday downgraded iStar to C, saying the company faces inevitable default, absent a significant improvement in commercial real estate fundamentals.