Business Context and Reporting Period
Kite Realty Group Trust (the "Company") and Kite Realty Group, L.P. (the "Operating Partnership") filed this Form 8-K on June 6, 2011, to report the entry into a Material Definitive Agreement. The filing details the execution of a Second Amended and Restated Credit Agreement with KeyBank National Association as Administrative Agent and other lenders.
Key Financial Metrics and Debt Structure
- Credit Facility: $200 million unsecured revolving credit facility.
- Availability: As of June 6, 2011, approximately $40.1 million was available for borrowing.
- Outstanding Debt Refinanced: Initial borrowings replaced $125.3 million principal outstanding under the prior agreement.
- Maturity: Scheduled for June 6, 2014, with a one-year extension option.
- Interest Rate: LIBOR plus 225 to 275 basis points, dependent on leverage ratio.
- Unused Fee: 25 to 35 basis points on unused commitments.
- Additional Capacity: Option to increase commitment to $300 million; $25 million capacity for letters of credit; $25 million swingline loan capacity.
Material Changes Versus Prior Period
The new Credit Agreement amends and restates the Prior Credit Agreement dated February 20, 2007. While the total revolving facility amount remains at $200 million, the agreement introduces updated financial covenants and terms. The immediate material change is the refinancing of the $125.3 million outstanding balance from the prior agreement under the new terms.
Covenants, Risks, and Management Commentary
The Operating Partnership's ability to borrow is subject to strict financial and operational covenants, including:
- Leverage Ratio: Maximum of 65%, reducing to 62.5% after December 31, 2012.
- Coverage Ratio: Adjusted EBITDA to fixed charges must be at least 1.50 to 1.
- Net Worth: Minimum tangible net worth of $325 million (plus 75% of future equity proceeds).
- Debt Limits: Unsecured debt limited to the lesser of 62.5% of unencumbered property value or a debt service coverage ratio of 1.40 to 1.
- Asset Ratios: Secured indebtedness to total asset value capped at 0.575 to 1; floating rate debt capped at 0.35 to 1; recourse debt capped at 0.30 to 1.
- Occupancy: Minimum unencumbered property pool occupancy rate of 80%.
Proceeds are designated for general corporate purposes. The Company and certain subsidiaries act as guarantors for the Operating Partnership's obligations.
Investor Verification Checklist
- Verify the current leverage ratio and Adjusted EBITDA to ensure compliance with the 65% and 1.50x covenants.
- Confirm the occupancy rate of the unencumbered property pool meets the 80% minimum threshold.
- Review the specific calculation of "Total Asset Value" and "Tangible Net Worth" as defined in the attached Credit Agreement (Exhibit 10.1).
- Assess the impact of the variable interest rate (LIBOR + spread) on future debt service costs.
- Monitor the $40.1 million available borrowing capacity against projected capital needs.