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: August 18, 2011
Event: Creation of a direct financial obligation via a new Revolving Credit Agreement.
Key Financial Metrics
This filing details the establishment of a new credit facility rather than reporting operational financial results (revenue, profit, or cash flow). Key metrics related to the new obligation include:
- Facility Size: Up to $55.6 million Australian Dollars and $50.0 million Singapore Dollars (approximately $100.0 million USD equivalent as of August 18, 2011).
- Expansion Option: Ability to increase the facility to up to $245.0 million Singapore Dollars (approximately $200.0 million USD equivalent).
- Maturity Date: August 2012.
- Interest Rates: Based on BBSY and SIBOR indexes plus a margin of 1.20% to 1.75%. At closing, rates were 6.15% for Australian Dollar borrowings and 1.43% for Singapore Dollar borrowings.
- Commitment Fee: Quarterly fee ranging from 0.25% to 0.50% per annum on unused commitments.
- Currency: Initial draws in Singapore and Australian Dollars; future draws may include Hong Kong Dollars.
Material Changes
The primary material change is the execution of the Revolving Credit Agreement on August 18, 2011, involving subsidiaries Digital Singapore Jurong East Pte. Ltd., Digital Realty Datafirm, LLC, and Digital Realty Datafirm 2, LLC. The agreement is guaranteed by the Company, the Operating Partnership, and certain subsidiaries. This filing does not provide comparative financial data against prior periods as it is a transactional report.
Guidance, Risks, and Covenants
Covenants and Restrictions:
- Debt and Investment: Limitations on incurring additional indebtedness, making certain investments, or merging with another company.
- Financial Ratios: Requirements to maintain specific financial coverage ratios and a pool of unencumbered assets.
- Distributions: Restrictions on distributions to stockholders or share repurchases exceeding 95% of consolidated Funds From Operations (FFO) over any four consecutive fiscal quarters, unless necessary to maintain REIT qualification or avoid taxes.
- Default Consequences: In the event of non-payment, covenant breach, or cross-default, distributions are limited strictly to those necessary to maintain REIT status. A downgrade below investment grade would further limit recourse debt.
Risks and Contingencies:
- Events of Default: Include non-payment, breach of warranties, non-compliance with covenants, cross-defaults, or change of control. These may lead to acceleration of principal and interest.
- Bankruptcy: Outstanding principal and interest automatically accelerate upon an order for relief regarding any borrower under bankruptcy or insolvency laws.
Investor Verification Checklist
- Verify the current utilization of the new $100 million USD equivalent facility and any subsequent draws.
- Confirm the Company's current long-term senior unsecured debt rating to determine the applicable interest margin (1.20% vs. 1.75%).
- Review the Company's consolidated Funds From Operations (FFO) to assess the 95% distribution cap restriction.
- Monitor compliance with the required financial coverage ratios and unencumbered asset pool.
- Check for any credit rating downgrades that could trigger further debt restrictions.