Business Context and Reporting Period
This Form 8-K Current Report was filed by CubeSmart and CubeSmart, L.P. on January 30, 2019. The filing reports the completion of a material definitive agreement involving the issuance of senior notes to refinance existing debt and fund general corporate purposes.
Key Financial Metrics
- Debt Issuance: $350.0 million aggregate principal amount of 4.375% senior notes due February 15, 2029.
- Net Proceeds: Approximately $345.0 million after underwriters' discount and transaction expenses.
- Interest Rate: 4.375% per annum, payable semi-annually in arrears (first payment August 15, 2019).
- Debt Structure: Senior unsecured indebtedness of the Operating Partnership, fully and unconditionally guaranteed by CubeSmart.
Material Changes and Use of Proceeds
The primary material change is the addition of $350.0 million in long-term debt. The Operating Partnership intends to use the net proceeds as follows:
- Repay $200.0 million of outstanding indebtedness under the unsecured term loan portion of the credit facility maturing in January 2019.
- Allocate remaining funds to working capital and other general corporate purposes, which may include the repayment or repurchase of other indebtedness.
Outlook, Risks, and Covenants
The indenture contains restrictive covenants that limit the ability of the Operating Partnership and its subsidiaries to incur additional debt or debt secured by liens. Additionally, the company is restricted from owning unencumbered assets representing less than 150% of the outstanding principal amount of unsecured debt. The notes are redeemable prior to November 15, 2028, at a make-whole redemption price, and at par thereafter.
Investor Verification Checklist
- Verify the exact amount of the unsecured term loan repaid ($200.0 million) and confirm the remaining balance of the credit facility.
- Review the full text of the Sixth Supplemental Indenture (Exhibit 4.3) for specific details on debt incurrence limitations and asset coverage ratios.
- Confirm the impact of the new 4.375% interest rate on the company's overall weighted average cost of debt compared to the refinanced term loan.
- Check subsequent filings for any changes in the use of proceeds regarding "general corporate purposes."