CB Richard Ellis shares surge on plan to pay down debt

Shares of CB Richard Ellis Group Inc., a commercial property brokerage with $2.4 billion in debt, surged nearly 14% after the firm announced plans to raise at least $550 million selling shares and debt to the public and to investors including the hedge fund run by billionaire John Paulson.

The Los Angeles company will sell 13.4 million shares to Paulson & Co. for $100 million, the brokerage said in a regulatory filing.

CB Richard Ellis also has plans to raise an additional $50 million in a series of stock sales managed by JPMorgan Chase & Co. and to sell by private placement $400 million in notes repayable in 2017, it said.

The brokerage has $310 million in debt due next year and $2.28 billion due in 2011, according to Bloomberg data, most of it tied to the 2006 purchase of Trammell Crow Co.

The company paid $1.9 billion for Trammell Crow in 2006 in a bid to expand its building management business.

Moody’s Investors Service assigned a Ba3 rating to CB Richard Ellis’ new senior subordinated debt and said the outlook was negative.

“CBRE’s real estate services business is highly correlated with real estate and economic cycles, especially its transactional businesses,” Moody’s analysts led by senior credit officer Karen Nickerson said in a statement. “Positively, Moody’s believes the company has adequate liquidity to fund its 2009 debt and operating obligations.”

CB Richard Ellis shares rose $1.11 to $9.25.

Commercial real estate companies are losing revenue as lenders cut financing for building sales and employers slash jobs, reducing their need for office space. Both mean lower commissions for brokerages.