Oct. 7--Sovran Self Storage's fourth-quarter earnings will take a hit of about 34 cents per share because of costs associated with its recent move to sell additional stock and use the proceeds to pay down some of its debt.

The extra expenses will trim Sovran's fourth-quarter funds from operations to an estimated 26 cents to 28 cents per share and reduce the Williamsville- based real estate investment trust's earnings for the full year to between $2.33 and $2.37 per share, down from its earlier forecast of $2.70 to $2.74 per share.

The biggest added expense is the roughly $8.5 million that Sovran will pay to cancel interest rate swap contracts that the company used to stabilize its interest expenses on the $100 million in bank term notes that it will repay with the proceeds from the stock sale. Sovran also expects to pay about $640,000 in unamortized financing costs stemming from the repayment of the bank term notes.

The stock sale, which closed last week, raised about $114 million, excluding offering expenses.

While repaying the debt will cut Sovran's interest expenses going forward, the 4 million additional shares of stock now in circulation also will dilute the company's earnings per share by 2 cents to 3 cents per share.

Sovran executives are hoping that the stock sale and debt repayment will lead to an upward revision of its recently reduced credit rating. If Sovran regains its investment grade credit rating, the company could further reduce its interest expenses, which would offset the earnings dilution caused by the stock sale, executives said Tuesday.

Sovran owns or manages 382 Uncle Bob's Self Storage facilities in 24 states.

drobinson@buffnews.com

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