Business Context and Reporting Period
Company: Kite Realty Group Trust and Kite Realty Group, L.P.
Filing Type: Form 8-K (Current Report)
Date of Report: July 28, 2016
Event: Entry into a Material Definitive Agreement involving the amendment of credit facilities and term loans.
Key Financial Metrics and Debt Structure
This filing details the restructuring of the Operating Partnership's unsecured debt facilities. No revenue, profit, or cash flow data is provided in this specific filing.
| Facility Type | Amount | Maturity Date | Interest Margin (LIBOR +) |
|---|---|---|---|
| Revolving Facility | $500 million | July 28, 2020 | 135-195 bps (Leverage-based) 85-155 bps (Rating-based) |
| Term Loan A | $200 million | July 1, 2019 | 135-190 bps (Leverage-based) 95-190 bps (Rating-based) |
| Term Loan B | $200 million | July 28, 2021 | 130-190 bps (Leverage-based) 90-175 bps (Rating-based) |
Expansion Options: The Revolving Facility may be increased to $1 billion, and Term Loan B may be increased by an additional $200 million, subject to lender commitments.
Letters of Credit: Up to $50 million available under the Revolving Facility.
Swingline Loans: Up to $50 million available for same-day borrowings.
Material Changes Versus Prior Period
- Extended Maturities: The Revolving Facility maturity was extended from July 1, 2018, to July 28, 2020. Term Loan B was created with a maturity of July 28, 2021, extending beyond the prior July 1, 2019, date.
- Reduced Interest Margins: Applicable interest rate margins were reduced for both leverage-based and credit rating-based pricing structures compared to the Prior Credit Agreement.
- Valuation Methodology: The capitalization rate used to calculate total asset value for leverage ratios was improved from 7% to 6.75%, increasing the calculated asset value.
- Fee Structure: Unused commitment fees on the Revolving Facility (if using credit rating basis) were adjusted to a range of 12.5 to 30 basis points (previously 12.5 to 25 basis points).
Guidance, Covenants, and Risks
Financial Covenants: The Operating Partnership must maintain the following ratios:
- Maximum leverage ratio: 60%.
- Adjusted EBITDA to fixed charges coverage ratio: At least 1.50 to 1.00.
- Minimum tangible net worth: $1.4 billion (plus 75% of net proceeds from future equity issuances).
- Secured recourse debt to total asset value: No more than 0.15 to 1.00.
- Secured indebtedness to total asset value: No more than 0.45 to 1.00.
- Unsecured debt to unencumbered pool value: No more than 0.60 to 1.00.
- Net operating income to unsecured debt interest expense: Less than 1.75 to 1.00.
Guaranty: Kite Realty Group Trust agreed to a "Springing Guaranty," which becomes effective only upon specific events such as the Company engaging in business outside of partnership management, guaranteeing other debt, or bankruptcy/insolvency events.
Risks: Failure to comply with covenants or the occurrence of events of default could allow lenders to declare all obligations immediately due and payable.
Investor Verification Checklist
- Verify the current leverage ratio and tangible net worth to ensure compliance with the new 60% leverage cap and $1.4 billion net worth minimum.
- Confirm whether the company has elected to use its credit rating or leverage ratio as the basis for interest rate determination.
- Review the specific conditions required to exercise the expansion options for the Revolving Facility and Term Loan B.
- Monitor the "Springing Guaranty" triggers to understand the conditions under which the Trust becomes directly liable for the debt.