Business Context and Reporting Period
This Form 8-K filing by Wheeler Real Estate Investment Trust, Inc. (WHLR) reports a material definitive agreement entered into on December 22, 2020. The Company, a Maryland corporation, secured a new financing arrangement to refinance existing debt and redeem preferred stock.
Key Financial Metrics and Transaction Details
- Loan Amount: $25.0 million term loan.
- Interest Rate: 13.50% per annum.
- Maturity Date: March 31, 2023.
- Lender: Powerscourt Investments XXII, LP (an affiliate of funds managed by Waterfall Asset Management, LLC).
- Use of Proceeds: Payoff of existing indebtedness with KeyBank National Association, redemption of 8.75% Series D Cumulative Convertible Preferred Stock, and payment of transaction fees.
- Collateral: Liens on equity interests in Wheeler REIT, L.P. and mortgages on specific Collateral Properties.
- Equity Component: Issuance of a warrant to purchase 496,415 shares of Common Stock at $3.12 per share, exercisable for 36 months.
Material Changes and Covenants
The Company has incurred a new direct financial obligation with a significantly higher interest rate (13.50%) compared to typical senior debt, reflecting the secured nature of the loan. The agreement includes restrictive covenants limiting the Company's ability to incur additional indebtedness, create liens, pay dividends, or dispose of assets without lender consent. The Company is prohibited from making partial prepayments of the loan principal.
Outlook, Risks, and Contingencies
Prepayment Terms: The Company may prepay the loan in full subject to a prepayment premium calculated based on the remaining term to March 31, 2023. Mandatory prepayments are required under certain circumstances defined in the agreement.
Events of Default: Standard events include nonpayment, breach of covenants, bankruptcy, material adverse effects, and the failure of key individuals to remain employed.
Registration Rights: The Company entered into a Registration Rights Agreement to facilitate the resale of the warrant shares, contingent upon the Company paying all dividends on outstanding preferred stock for which it had not been paying dividends.
Financial Statements: This filing does not provide updated revenue, profit, cash flow, or liquidity metrics beyond the specific terms of the financing transaction.
Investor Verification Checklist
- Verify the specific amount of 8.75% Series D Preferred Stock redeemed with the loan proceeds.
- Confirm the identity and value of the "Collateral Properties" pledged as security.
- Review the Company's current dividend status on preferred stock to assess the trigger for the Registration Rights Agreement.
- Assess the impact of the 13.50% interest expense on future cash flow and earnings.
- Monitor compliance with the restrictive covenants regarding future indebtedness and asset dispositions.