Business Context and Reporting Period
CareTrust REIT, Inc. filed this Form 8-K on August 5, 2015, to report the entry into a new material definitive agreement and the termination of a prior credit facility. The filing details a refinancing transaction executed on August 5, 2015.
Key Financial Metrics and Debt Structure
- New Credit Facility: An unsecured asset-based revolving credit facility with aggregate commitments of $300.0 million.
- Subfacilities: Includes a $30.0 million letter of credit subfacility and a $30.0 million swingline loan subfacility.
- Available Borrowing Base: As of August 5, 2015, the amount available to be drawn was $92.2 million (prior to the refinancing draw).
- Refinancing Amount: $25.0 million of the new facility proceeds were used to pay off the existing secured facility.
- Maturity: August 5, 2019, with two six-month extension options.
- Interest Rates: Base rate plus 0.75% to 1.40% or LIBOR plus 1.75% to 2.40%, based on the debt-to-asset value ratio.
- Fees: Commitment fee on unused portions of 0.15% to 0.25% per annum.
Material Changes Versus Prior Period
The Company terminated its existing secured asset-based revolving credit facility dated May 30, 2014, with SunTrust Bank. This was replaced by the new unsecured facility with KeyBank National Association as the administrative agent. The new agreement increases the aggregate principal commitment from the prior facility (amount not specified in text) to $300.0 million and changes the security status from secured to unsecured.
Outlook, Covenants, and Risks
- Use of Proceeds: Working capital, funding acquisitions, and general corporate purposes.
- Expansion Capacity: The Operating Partnership may seek to increase commitments or establish new tranches up to an additional $200.0 million, subject to lender commitments and pro forma compliance.
- Financial Covenants: The agreement requires quarterly compliance with a maximum debt-to-asset value ratio, minimum fixed charge coverage ratio, minimum tangible net worth, maximum cash distributions to operating income ratio, and maximum secured debt ratios.
- Restrictions: Covenants restrict granting liens, incurring indebtedness, selling assets, making investments, and paying dividends.
- REIT Compliance: An event of default occurs if the Company fails to operate in conformity with REIT qualification and taxation requirements.
Investor Verification Checklist
- Verify the specific borrowing base calculation methodology for the $92.2 million available draw.
- Confirm the exact principal amount of the terminated SunTrust facility to assess the net increase in liquidity.
- Review the full text of Exhibit 10.1 for detailed definitions of the financial maintenance covenants.
- Monitor the Company's debt-to-asset value ratio to determine the applicable interest rate margin.
- Check for any subsequent filings regarding the exercise of the $200.0 million expansion option.