Business Context and Reporting Period
Company: Broadstone Net Lease, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: June 23, 2017 (Event Date)
Reporting Period: Single event date; not a periodic financial report.
The filing discloses the entry into a new $800 million unsecured Revolving Credit and Term Loan Agreement and the amendment of an existing term loan agreement. These actions replaced the Company's previous $400 million credit facility and a maturing $185 million term loan.
Key Financial Metrics and Debt Structure
This filing focuses on capital structure and debt facilities rather than operating performance metrics such as revenue or profit.
| Facility Component | Total Commitment | Outstanding Balance (as of June 23, 2017) | Maturity Date |
|---|---|---|---|
| Revolving Credit Facility (Revolver) | $400 million | $90 million | January 21, 2022 |
| 5.5-Year Term Loan | $250 million | $250 million | January 23, 2023 |
| 7-Year Term Loan | $150 million | $0 (Undrawn) | June 21, 2024 |
| Total New Credit Agreement | $800 million | $340 million | N/A |
| Amended Term Loan (Restated) | $325 million | $325 million | N/A |
Interest Rates (Based on Baa3 Credit Rating):
- Revolver: LIBOR + 1.2% or Base Rate + 0.2%.
- 5.5-Year Term Loan: LIBOR + 1.35% or Base Rate + 0.35%.
- 7-Year Term Loan: LIBOR + 1.9% or Base Rate + 0.9%.
Use of Proceeds: Repayment of existing indebtedness (including the $185 million term loan maturing October 11, 2018), funding future acquisitions, and general corporate purposes.
Material Changes Versus Prior Period
- Facility Replacement: The new $800 million Credit Agreement replaced the existing $400 million unsecured revolving credit and term loan agreement.
- Debt Consolidation: Proceeds were used to repay a $185 million term loan scheduled to mature in October 2018.
- Term Loan Restructuring: The existing $375 million Term Loan Agreement was amended and restated. A one-time non-pro rata payment of $50 million was made to PNC Bank, National Association, reducing the facility size to $325 million and removing PNC as a lender.
- Covenant Alignment: Financial maintenance covenants in the Restated Term Loan Agreement were aligned with the new Credit Agreement.
Guidance, Outlook, and Risks
Management Commentary and Outlook:
- The Company secured an investment-grade credit rating of Baa3, which determined the initial interest margins.
- The agreement includes an "accordion feature" allowing the Company to increase the aggregate facility size from $800 million to $1.0 billion (an additional $200 million) after June 22, 2018, subject to lender approval.
- The Revolver includes a one-time option to extend the maturity by five months to June 21, 2022, subject to conditions and a fee.
Risks and Contingencies:
- Covenants: The agreement includes restrictive covenants on additional indebtedness, liens, payments, investments, and mergers. It also includes financial maintenance covenants (minimum unsecured interest expense coverage, maximum leverage, maximum secured indebtedness, and minimum fixed charge coverage).
- Events of Default: Certain events of default could result in the acceleration of obligations. The agreement includes cross-default provisions with other indebtedness.
Important Facts for Investor Verification
- Verify the Company's current credit rating (Baa3) to confirm applicable interest rate margins.
- Confirm the status of the $185 million term loan repayment and the $50 million paydown to PNC Bank.
- Review the specific financial maintenance covenants (leverage and coverage ratios) to assess compliance risk.
- Monitor the utilization of the $150 million undrawn 7-Year Term Loan and the $310 million remaining capacity on the Revolver.
- Check for any future exercises of the accordion feature to increase total debt capacity to $1.0 billion.