Business Context and Reporting Period
This Form 8-K Current Report is filed by Community Healthcare Trust Inc. on May 29, 2015, with the earliest event reported on that date. The filing primarily discloses the entry into a material definitive agreement regarding a new credit facility and updates on the acquisition of initial properties following the company's initial public offering.
Key Financial Metrics and Agreements
Revolving Credit Facility
- Facility Size: $75.0 million initial commitment with an accordion feature allowing expansion to $125.0 million (total potential capacity of $200.0 million).
- Interest Rates: Floating rate based on LIBOR plus 2.50% to 3.00% or Base Rate plus 1.50% to 2.00%, dependent on leverage ratio.
- Unused Fee: 0.25% if utilization exceeds 50%; 0.35% if utilization is 50% or less.
- Guarantors: Material subsidiaries of the company.
Financial Covenants
- Maximum Leverage Ratio: 50%.
- Minimum Fixed Charge Coverage Ratio: 1.75 to 1.00.
- Minimum Tangible Net Worth: Approximately $96.9 million plus 75.0% of net proceeds from future equity raises.
- Minimum Liquidity: $5.0 million.
- Maximum Distribution Ratio: Greater of 95% of Funds From Operations or the amount required to maintain REIT status.
Asset Acquisitions
- As of May 29, 2015: 15 of 35 initial properties acquired for approximately $41.2 million.
- As of June 4, 2015: 23 of 35 initial properties acquired for an aggregate purchase price of $62.7 million.
Material Changes and Unusual Items
The filing does not report revenue, profit, or cash flow figures for a specific period, as it is a current report focused on corporate actions rather than periodic financial results. The primary material change is the establishment of the $75.0 million credit facility on June 3, 2015, which provides liquidity for operations and acquisitions. Additionally, the company reported accelerated progress in acquiring its initial property portfolio, increasing from 15 to 23 properties within a few days of the report date.
Guidance, Outlook, and Risks
The filing incorporates by reference the company's IPO prospectus for further details on the credit facility and business strategy. Key risks and contingencies include:
- Covenant Compliance: Borrowing availability is strictly limited by a borrowing base valuation of unencumbered properties and adherence to financial covenants.
- Events of Default: Customary events of default exist which could allow lenders to terminate commitments and accelerate payments.
- Acquisition Progress: The company is in the process of acquiring 35 initial properties; the filing notes that 23 were acquired as of June 4, 2015, implying 12 remain to be acquired.
Investor Verification Checklist
- Verify the specific properties included in the borrowing base valuation to understand actual borrowing capacity.
- Confirm the status of the remaining 12 initial properties and any delays in acquisition.
- Review the full Credit Agreement (Exhibit 10.1) for detailed definitions of leverage ratios and fixed charge coverage.
- Monitor the company's tangible net worth to ensure compliance with the $96.9 million minimum threshold.
- Check subsequent filings for any drawdowns on the credit facility or changes in interest rate spreads.