Business Context and Reporting Period
This Form 8-K Current Report is filed by Global Medical REIT Inc. (the "Company") on December 5, 2016, regarding events occurring on December 2, 2016. The filing discloses the entry into a material definitive agreement and the creation of a direct financial obligation in the form of a new senior revolving credit facility.
Key Financial Metrics and Facility Terms
- Facility Size: Initial revolving credit commitment of $75.0 million.
- Expansion Capacity: Includes an accordion feature allowing for an additional $125.0 million, bringing the total potential facility size to $200.0 million.
- Lender: BMO Harris Bank N.A. (Administrative Agent).
- Interest Rates: Floating rate based on LIBOR plus 2.00% to 3.00% or Base Rate plus 1.00% to 2.00%, dependent on the consolidated leverage ratio.
- Commitment Fees: Quarterly fee of 0.20% if average daily unused commitments are less than 50%; 0.30% if 50% or greater.
- Borrowing Base: Availability is limited by a quarterly valuation of certain properties owned by Subsidiary Guarantors.
Material Changes and Covenants
The Company has entered into a new credit agreement, establishing specific financial covenants that must be maintained:
- Maximum Consolidated Leverage Ratio: Less than 0.65:1.00 for fiscal quarters ending prior to October 1, 2019; reduced to 0.60:1.00 thereafter.
- Minimum Fixed Charge Coverage Ratio: 1.50:1.00.
- Minimum Net Worth: $119,781,219 plus 75% of net proceeds from subsequent equity offerings.
- Secured Recourse Debt Ratio: Total secured recourse debt to total asset value must not exceed 0.10:1.00.
- Other Covenants: Includes customary limitations on liens, indebtedness, distributions, mergers, investments, restricted payments, and asset sales.
Guidance, Outlook, and Risks
The filing does not provide specific forward-looking financial guidance or management commentary regarding future earnings or operational outlook beyond the terms of the credit facility. The primary risk disclosed relates to compliance with the new financial covenants, particularly the leverage and fixed charge coverage ratios. Failure to maintain these ratios could result in a default under the agreement.
Investor Verification Checklist
- Verify the current consolidated leverage ratio to ensure compliance with the 0.65:1.00 threshold.
- Confirm the current fixed charge coverage ratio meets the 1.50:1.00 minimum requirement.
- Review the quarterly borrowing base valuation to determine actual available liquidity versus the $75.0 million commitment.
- Examine the full Credit Facility Agreement (Exhibit 10.1) for detailed definitions of "Total Asset Value" and "Secured Recourse Debt."
- Monitor the Company's capital structure to ensure the secured recourse debt ratio remains below 0.10:1.00.