Business Context and Reporting Period
Company: American Homes 4 Rent
Filing Type: Form 8-K (Current Report)
Date of Report: September 12, 2018
Event: Entry into a Material Definitive Agreement for the sale of preferred shares.
Key Financial Metrics
- Offering Size: 4,000,000 shares of 6.25% Series H cumulative redeemable perpetual preferred shares of beneficial interest.
- Over-Allotment Option: Underwriters granted a 30-day option to purchase up to an additional 600,000 shares.
- Estimated Net Proceeds: Approximately $96.5 million (after underwriting discounts, commissions, and estimated offering expenses).
- Debt Refinancing Target: $115.0 million face value of outstanding 3.25% exchangeable senior notes due November 15, 2018.
- Closing Date: Expected September 19, 2018.
Material Changes and Strategic Actions
The Company entered into an Underwriting Agreement with Wells Fargo Securities, LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated, and Morgan Stanley & Co. LLC. The primary strategic change involves raising capital to refinance existing debt. The net proceeds from the preferred share offering will be contributed to the Operating Partnership to fund the exchange for cash of the $115.0 million in senior notes maturing in November 2018.
Guidance, Risks, and Unusual Items
- Dividend Restrictions: Upon issuance of the Series H Preferred Shares, the Company's ability to make distributions on, or redeem, purchase, or acquire any other shares ranking junior to or on a parity with the Series H Preferred Shares will be restricted if distributions on the Series H shares are not declared during any distribution period.
- Legal Structure: The Company filed Articles Supplementary designating 4,600,000 preferred shares as "6.25% Series H Preferred Shares."
- Underwriter Relationships: The underwriters have engaged in, and may continue to engage in, investment banking and commercial dealings with the Company, receiving customary fees.
Investor Verification Checklist
- Verify the final closing date of the offering (expected September 19, 2018) and the actual net proceeds received.
- Confirm the successful exchange of the $115.0 million 3.25% exchangeable senior notes due November 15, 2018.
- Review the Articles Supplementary (Exhibit 3.1) for specific terms regarding the 6.25% dividend rate and redemption features.
- Monitor the Company's cash flow to ensure it can meet the cumulative dividend obligations on the new Series H Preferred Shares to avoid restrictions on other distributions.