Business Context and Reporting Period
Company: U-Store-It Trust (operating as CubeSmart)
Filing Type: Form 8-K (Current Report)
Date of Report: November 21, 2006
Event: Entry into a Material Definitive Agreement regarding a new credit facility.
Key Financial Metrics and Debt Structure
The filing details the establishment of a new unsecured credit facility replacing previous arrangements.
- Total Credit Facility: $450 million
- Term Loan Component: $200 million
- Revolving Loan Component: $250 million
- Initial Borrowings (Nov 21, 2006): $200 million in term loans and $90.5 million in revolving loans.
- Term: Three years, terminating November 20, 2009, with a one-year extension option.
- Interest Rates: Variable based on Alternative Base Rate or Eurodollar (LIBOR) plus an applicable margin ranging from 0.00% to 1.50% depending on leverage ratios and credit ratings.
Material Changes Versus Prior Period
The new Credit Facility effectively replaced the "Old Credit Facilities," which consisted of:
- A $250 million unsecured revolving credit facility (scheduled to terminate February 22, 2009).
- A $50 million bridge facility (scheduled to terminate November 30, 2006).
This transaction consolidates the company's borrowing capacity and extends the maturity of the term portion.
Guidance, Covenants, and Risks
Intended Use of Proceeds: Financing future acquisition and development of self-storage facilities, debt repayments, and general working capital.
Financial Covenants: Borrowing is subject to compliance with the following metrics:
- Maximum total indebtedness to total asset value: 65%
- Maximum floating rate indebtedness to total indebtedness: 35%
- Minimum unencumbered interest coverage ratio: 2.0:1.0
- Minimum unencumbered pool property value: $400,000,000
- Minimum fixed charge coverage ratio: 1.6:1.0
- Minimum tangible net worth: $673,234,400 (plus 75% of net equity proceeds after Sept 30, 2006)
Distribution Restrictions: For periods ending on or after December 31, 2008, distributions on common shares are restricted to the greater of 95% of funds from operations or the amount necessary to maintain REIT status.
Guarantors: U-Store-It Trust, U-Store-It Mini Warehouse Co., and YSI Management LLC serve as guarantors.
Investor Verification Checklist
- Verify the company's current leverage ratio and credit rating to determine the applicable interest margin.
- Confirm compliance with the minimum tangible net worth and unencumbered pool property value covenants.
- Review the impact of the new floating rate debt exposure on future interest expense given the variable rate structure.
- Assess the company's ability to meet the 2.0:1.0 unencumbered interest coverage ratio under current market conditions.
- Examine the specific terms of the one-year extension option for the credit facility.