CapitalSource Gains on Volume Jump

CHEVY CHASE, Md. (TheStreet) -- CapitalSource (CSE Quote) shares rose Tuesday on above-average volume after the credit services company said it will sell 143 long-term care facilities in a $860 million deal.

CapitalSource said it will sell substantially all of its healthcare net lease portfolio to Omega Healthcare Investors (OHI Quote) in a series of three closings that will begin in December and wrap up before the end of 2011. CapitalSource will receive $280 million in cash and $51 million of Omega's stock. The deal also includes the assumption of $529 million in debt related to the assets Omega is purchasing.

CapitalSource plans to use the cash proceeds principally to pay down debt. CapitalSource will retain ownership of 38 additional long term care facilities not included in this sale, but will sell separately.

In a separate release, CapitalSource said Founder and current CEO John Delaney will assume the newly created role of executive chairman, with Steven Museles and James Pieczynski becoming co-CEOs. President Dean Graham has also decided to step down from that position. The changes are effective at the beginning of 2010.

Some investors posting on Internet message boards said the sale should help earnings in the near term and solve liquidity issues facing the company, but that the move isn't a positive for the long term. With shares of the acquirer Omega rising 4.6% early Tuesday, it appears they may be correct.

Others expressed disappointment that Graham was leaving CapitalSource, and there was some worry over two co-CEOs running the company.

Shares of CapitalSource were rising by 13 cents, or 3.5%, to $3.84. Earlier in the session, the stock touched an intraday high of $4.10. More than 6.3 million shares changed hands by 10:30 a.m. EDT Tuesday, compared to the stock's three-month average daily volume of 4.2 million, according to Yahoo! Finance.

CapitalSource has a 290 million-share float with a short interest float of 2.1% as of Oct. 27, according to Yahoo! Finance. Insiders hold 13.1% of the company's shares, with another 55.6% owned by institutions.

-- Written by Robert Holmes in New York.

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