Fortress Likely to Miss Deadline to Refinance $2B Bonds

Fortress Investment Group is approaching a debt deadline with no refinancing in sight.

An entity tied to the company appears bound to miss a July 15 repayment date to refinance roughly $2 billion of bonds backed by Amazon warehouses, Bloomberg reported. The company disclosed the looming threat in a note to bondholders late last week.

In 2020, Fortress sold approximately $2 billion of bonds backed by the cash flow generated from 11 warehouses. Bondholders agreed to receive about 2 percent interest on the deal.

Should Fortress ultimately refinance the bonds, it will almost certainly have to do so at a much higher interest rate than five years ago, when rates were at their nadir. That could imperil the cash flows generated by the warehouses, which are leased to Amazon on a long-term basis, according to S&P Global Ratings.

Fortress claims it is “actively working on a solution for refinancing” the debt. Fortunately for the company, missing the mid-July deadline doesn’t constitute default.

It does, however, open up a different can of worms. Once the deadline passes, interest on the debt would greatly increase and begin to accrue, according to loan documents.

Fortress declined to comment to Bloomberg.

This is one of the first public challenges Fortress has faced since the departure of Steve Stuart in the spring. Stuart was a managing director of Fortress and led the firm’s new business origination for the credit and real estate team.

Other notable exits from Fortress recently include Randall Shy, Andrew Bartholomew, Alexandra Wiggins and Ivan Yee. A year ago, Mubadala Capital and Fortress completed a buyout of SoftBank Group’s interest in Fortress Investment Group, which resulted in Joshua Pack and Drew McKnight, formerly managing partners at Fortress, becoming co-CEOs.

Amazon is the biggest player in the country’s industrial market. In April, the e-commerce giant was reported to be considering a $15 billion plan to expand its industrial real estate capabilities across the country, plotting the creation of roughly 80 logistics facilities that would consist of delivery hubs and multistory fulfillment centers.