Business Context and Reporting Period
Company: Digital Realty Trust, Inc. and Digital Realty Trust, L.P.
Filing Type: Form 8-K (Current Report)
Date of Report: January 17, 2020
Event: Entry into a Material Definitive Agreement and creation of a direct financial obligation via the issuance of senior unsecured Euro-denominated notes.
Key Financial Metrics and Debt Issuance
The company issued a total of €1.7 billion in aggregate principal amount of Guaranteed Notes (the "Euro Notes") through its subsidiary, Digital Dutch Finco B.V. The notes are fully and unconditionally guaranteed by Digital Realty Trust, Inc. and the operating partnership.
| Note Series | Principal Amount | Coupon Rate | Maturity Date | Issue Price (% of Principal) |
|---|---|---|---|---|
| 2022 Notes | €300.0 million | 0.125% | October 15, 2022 | 99.910% |
| 2025 Notes | €650.0 million | 0.625% | July 15, 2025 | 99.347% |
| 2030 Notes | €750.0 million | 1.500% | March 15, 2030 | 99.206% |
Net Proceeds: Approximately €1,678.6 million after deducting managers' discounts and estimated offering expenses.
Material Changes and Use of Proceeds
This filing represents a significant increase in the company's debt obligations. The intended allocation of net proceeds is as follows:
- Green Projects: Proceeds from the 2025 and 2030 Notes are intended to finance or refinance "Eligible Green Projects," including green building, energy efficiency, and renewable energy initiatives.
- InterXion Transaction: Pending allocation to green projects, proceeds may be used to repay debt of InterXion Holding N.V. or pay transaction fees related to the combination with InterXion.
- General Corporate Purposes: Proceeds from the 2022 Notes (and potentially others) may be used to temporarily repay borrowings under global credit facilities, acquire properties, fund development, or for working capital.
Outlook, Risks, and Contingencies
InterXion Contingency: The offering is not conditioned on the completion of the InterXion combination. However, if the combination is not consummated by January 27, 2021, or the purchase agreement is terminated prior to that date, the issuer is required to redeem all 2025 and 2030 Notes at 101% of principal plus accrued interest.
Redemption Terms: The notes are redeemable at the issuer's option at a price equal to 100% of principal plus accrued interest and a make-whole premium, subject to specific exceptions near maturity dates.
Events of Default: Include failure to pay interest or principal, breach of covenants, cross-default on indebtedness exceeding $75 million, and bankruptcy or insolvency events.
Financial Metrics: The filing does not provide current revenue, profit, cash flow, or liquidity ratios. It focuses exclusively on the terms of the new debt issuance.
Investor Verification Checklist
- Verify the status of the InterXion combination to assess the risk of mandatory redemption of the 2025 and 2030 Notes at a premium.
- Confirm the specific allocation of proceeds to "Eligible Green Projects" versus debt repayment or general corporate purposes.
- Review the full text of the Indentures (Exhibits 4.1, 4.2, and 4.3) for detailed restrictive covenants regarding additional indebtedness and unencumbered asset pools.
- Monitor the company's ability to service the new debt obligations alongside existing credit facilities.