Business Context and Reporting Period
Cousins Properties Incorporated (Georgia) filed a Form 8-K on February 28, 2012, reporting the entry into a material definitive agreement. The filing details the restructuring of the Company's senior unsecured revolving line of credit.
Key Financial Metrics and Debt Structure
The Company established a new $350 million senior unsecured revolving credit facility (the "New Facility"), replacing the existing agreement. Key terms include:
- Capacity: $350 million initial commitment with an accordion feature allowing increases up to $150 million (total potential capacity of $500 million).
- Maturity: Extended to February 28, 2016, with an option for a one-year extension upon payment of a fee.
- Lenders: Led by Bank of America, N.A. and JPMorgan Chase Bank, N.A., with participation from Wells Fargo, PNC, U.S. Bank, and SunTrust.
- Interest Rates: Variable rates based on Eurodollar or Base Rate plus a spread ranging from 1.50% to 2.10% (Eurodollar) and 0.50% to 1.10% (Base Rate), dependent on leverage ratios.
- Facility Fees: Ranging from 0.20% to 0.40% based on leverage.
Material Changes Versus Prior Period
The New Facility replaces the Amended and Restated Credit Agreement dated August 29, 2007. Material changes include:
- Term Extension: Maturity date extended from August 29, 2012, to February 28, 2016.
- Capacity Increase: Introduction of an accordion feature to potentially increase the facility to $500 million.
- Cost Reduction: The agreement reduces interest rate spreads on borrowings compared to the Existing Facility.
Financial Covenants and Risks
The New Facility imposes specific financial covenants that the Company must maintain:
- Unencumbered Interest Coverage Ratio: Minimum of 2.00.
- Fixed Charge Coverage Ratio: Minimum of 1.40 (increasing to 1.50 during any extension period).
- Maximum Leverage: No more than 60%.
Intended Use of Proceeds: Acquisitions, development, or renovation of real estate; repayment of existing debt; working capital; and general corporate purposes.
Risks: The agreement includes customary events of default, including failure to pay interest/principal, covenant breaches, insolvency, change of control, and certain ERISA events. Default may result in the acceleration of outstanding amounts.
Investor Verification Checklist
- Verify the Company's current leverage ratio to ensure compliance with the 60% maximum covenant.
- Confirm the current unencumbered interest coverage and fixed charge coverage ratios against the 2.00 and 1.40 thresholds.
- Review the specific conditions required to exercise the accordion feature for the additional $150 million.
- Assess the impact of the reduced interest rate spreads on future interest expense projections.
- Examine the attached Exhibit 10.1 for detailed definitions of "Borrower Parties" and "Guarantors."