Business Context and Reporting Period
Company: Digital Realty Trust, Inc. and Digital Realty Trust, L.P.
Filing Type: Form 8-K (Current Report)
Date of Report: October 9, 2019
Event: Entry into a Material Definitive Agreement and creation of a direct financial obligation via the issuance of senior unsecured notes.
Key Financial Metrics and Transaction Details
| Metric | Value |
|---|---|
| Instrument Issued | 1.125% Guaranteed Notes due 2028 (Euro Notes) |
| Aggregate Principal Amount | €500 million |
| Currency | Euro (€) |
| Interest Rate | 1.125% per annum |
| Maturity Date | April 9, 2028 |
| First Interest Payment | April 9, 2020 |
| Issue Price | 99.111% of principal |
| Net Proceeds | Approximately €491.9 million |
| Guarantors | Digital Realty Trust, Inc. and Digital Realty Trust, L.P. (Operating Partnership) |
Material Changes and Use of Proceeds
This filing represents a new debt issuance rather than a change in operating performance metrics. The company intends to use the net proceeds of approximately €491.9 million for the following purposes:
- Repayment of borrowings outstanding under the operating partnership's global revolving credit facility.
- Acquisition of additional properties or businesses.
- Funding development opportunities.
- Working capital and general corporate purposes.
- Potential repayment of other debt or repurchase/redemption of outstanding debt securities or preferred stock.
Guidance, Risks, and Covenants
Covenants: The Indenture contains restrictive covenants, including limitations on the ability to incur additional indebtedness and requirements to maintain a pool of unencumbered assets.
Redemption Terms: The Notes are redeemable at the issuer's option at a price equal to 100% of the principal plus accrued interest and a make-whole premium. No make-whole premium applies if redeemed within 90 days of maturity.
Events of Default: Acceleration of maturity may occur due to:
- 30-day default on interest payments.
- Default on principal or redemption price payments.
- Failure to comply with agreements (with a 60-day cure period).
- Failure to pay other indebtedness exceeding $75 million (with a 60-day cure period).
- Bankruptcy, insolvency, or reorganization events.
Tax Provisions: Payments are made free of U.S. withholding taxes. If withholding is required by law, the issuer will pay additional amounts to gross up the payment. The issuer may redeem the Notes if changes in tax law create an obligation to pay additional amounts.
Investor Verification Checklist
- Verify the current exchange rate impact on the €500 million principal and €491.9 million net proceeds relative to the company's USD-denominated financial statements.
- Review the specific limitations on additional indebtedness within the attached Indenture (Exhibit 4.1) to assess future leverage capacity.
- Confirm the status of the global revolving credit facility to determine if proceeds were immediately applied to reduce outstanding balances.
- Assess the impact of the 1.125% interest rate on the company's overall weighted average cost of debt.
- Monitor the "unencumbered assets" covenant requirement to ensure compliance with the new indenture terms.