Business Context and Reporting Period
This Form 8-K Current Report was filed by Kite Realty Group Trust and Kite Realty Group, L.P. on October 26, 2015. The filing discloses the entry into a new material definitive agreement and the announcement of a preferred share redemption.
Key Financial Metrics and Agreements
Term Loan Facility
- Facility Size: Up to $200 million unsecured term loan.
- Lenders: KeyBank National Association as Administrative Agent and other lenders.
- Draw Period: Delayed draw basis from October 26, 2015, to June 30, 2016.
- Draw Requirements: Limited to three draws; each draw must be at least $25 million.
- Maturity Date: October 26, 2022.
- Expansion Option: Option to increase the facility to $250 million subject to conditions.
- Interest Rate: LIBOR plus 160-215 basis points or Base Rate plus 60-115 basis points (based on leverage ratio). Alternatively, based on credit rating: LIBOR plus 135-230 basis points or Base Rate plus 35-130 basis points.
- Prepayment: Permitted at any time; prepayment fee applies if prepaid before October 27, 2017.
- Unused Commitment Fee: Required if less than $200 million is drawn by January 24, 2016.
- Use of Proceeds: Repayment of indebtedness and general corporate purposes.
Preferred Share Redemption
- Security: 8.250% Series A Cumulative Perpetual Preferred Shares.
- Redemption Date: December 7, 2015.
- Redemption Price: $25.00 per share plus accrued and unpaid dividends of $0.0287 per share (from December 2, 2015, to the Redemption Date).
- Consequence: Shares will be delisted from the New York Stock Exchange upon redemption.
Material Changes and Covenants
The new Term Loan ranks pari passu with the Operating Partnership's existing $500 million unsecured revolving credit facility and $400 million unsecured term loan facility. The agreement includes customary financial covenants (maximum leverage ratio, secured/unsecured leverage ratios, fixed charge coverage ratio) and restrictive covenants regarding affiliate transactions, mergers, asset transfers, and liens. These covenants are substantially similar to the Existing Credit Facility.
Guidance, Risks, and Contingencies
The filing does not provide specific forward-looking guidance on revenue or earnings. Key risks and contingencies include:
- Events of Default: Includes payment defaults, cross-defaults with other indebtedness, covenant breaches, and bankruptcy events, which could lead to acceleration of all obligations.
- Commitment Fees: Risk of incurring unused commitment fees if the full $200 million is not drawn by January 24, 2016.
- Prepayment Penalties: Costs associated with early repayment prior to October 27, 2017.
Investor Verification Checklist
- Verify the actual drawdown schedule and amounts under the new $200 million Term Loan to assess potential unused commitment fees.
- Confirm the total capital outflow required for the December 7, 2015, redemption of Series A Preferred Shares.
- Review the Operating Partnership's current leverage ratio to determine the applicable interest rate margin under the new agreement.
- Check for any cross-default triggers related to the existing $900 million credit facilities.
- Confirm the delisting status of the Series A Preferred Shares on the NYSE following the redemption date.