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: January 15, 2016
Event: Creation of direct financial obligations through the execution of a new Global Senior Credit Agreement and a Term Loan Agreement.
Key Financial Metrics and Debt Structure
This filing details the restructuring of the company's senior unsecured debt facilities. No revenue, profit, or cash flow metrics are provided in this specific filing.
| Facility Type | Amount | Maturity Date | Key Terms |
|---|---|---|---|
| Global Revolving Credit Facility | $2.0 billion (expandable to $2.5 billion) | January 15, 2020 (plus two 6-month extensions) | Includes $100 million letter of credit sublimit. Floating rate: Index + 100 bps. Facility fee: 20 bps. |
| 5-Year Term Loan | $1.25 billion | January 15, 2021 | Floating rate: Index + 110 bps. Base rate: Index + 10 bps. |
| 7-Year Term Loan | $300 million | January 15, 2023 | Floating rate: Index + 155 bps. Base rate: Index + 55 bps. |
| Total Term Loan Balance | $1.55 billion | N/A | Approximately 75% fixed rate via interest rate swaps. All-in interest rate: 2.3%. |
Material Changes Versus Prior Period
- Revolving Credit Facility: Replaced the $2.0 billion facility executed on August 15, 2013. The new facility maintains the same principal amount but expands currency options and includes extension options.
- Term Loans: Replaced the $1.0 billion term loan agreement executed on April 16, 2012. The new structure increases total term debt capacity to $1.55 billion (expandable to $1.8 billion) and splits the maturity into 5-year and 7-year tranches.
- Interest Rate Hedging: Concurrent with the new term loans, the company entered into interest rate swaps to fix approximately 75% of the term loan balance.
Guidance, Risks, and Covenants
Covenants and Restrictions: Both agreements contain restrictive covenants limiting investments and mergers, and require the maintenance of financial coverage ratios regarding unencumbered assets. Distributions to stockholders and share repurchases are restricted during an event of default, with limited exceptions for REIT qualification and tax avoidance.
Events of Default: Include non-payment, breach of warranties, non-compliance with covenants, cross-defaults, and change of control. Defaults may lead to acceleration of principal and interest.
Related Parties: Lenders include affiliates of JPMorgan Chase Bank, N.A., which are also tenants of the company. Merrill Lynch and Citigroup serve as sales agents for the company's equity distribution agreements.
Investor Verification Checklist
- Verify the specific credit rating of the company's long-term senior unsecured debt to confirm the current interest rate margins and facility fees.
- Review the full Global Senior Credit Agreement and Term Loan Agreement (to be filed as exhibits to the 10-K) for detailed covenant calculations and unencumbered asset requirements.
- Confirm the impact of the 75% interest rate swap coverage on future cash flows if interest rates rise significantly.
- Monitor the company's ability to maintain the required financial coverage ratios to avoid triggering distribution restrictions.