Business Context and Reporting Period
This Form 8-K was filed by Griffin-American Healthcare REIT IV, Inc. on February 5, 2019. The registrant is an emerging growth company incorporated in Maryland. The report details the creation of a direct financial obligation through the execution of interest rate swap transactions.
Key Financial Metrics and Obligations
The filing discloses the following specific financial terms regarding the new derivative instruments:
- Total Notional Amount: $250,000,000
- Underlying Debt: Floating rate indebtedness under a $400,000,000 credit facility established on November 20, 2018.
- Effective Date: February 11, 2019
- Termination Date: November 19, 2021
- Counterparties and Fixed Rates:
- Citizens Bank: 2.491% on $139.5 million
- Comerica Bank: 2.490% on $36.7 million
- Fifth Third Financial Risk Solutions: 2.491% on $58.8 million
- The Huntington National Bank: 2.527% on $15.0 million
The filing does not provide data on revenue, profit, cash flow, margins, or overall liquidity positions.
Material Changes
The primary material change is the conversion of interest rate exposure for $250 million of the company's floating rate debt. By entering into these swaps, the registrant has fixed the interest rate payments for the specified notional amounts, mitigating the risk of rising LIBOR rates without incurring prepayment penalties or defeasance costs associated with refinancing the debt directly.
Outlook, Risks, and Management Commentary
Management entered into these transactions to manage interest rate risk. The registrant retains the right to modify or terminate the swaps subject to certain limitations. A key contingency noted is that the operating partnership remains ultimately obligated for all amounts due under the underlying Credit Facility, regardless of the swap terms. The filing does not contain forward-looking guidance on earnings or future capital deployment.
Investor Verification Checklist
- Verify the current status of the $400 million credit facility with Bank of America and other lenders.
- Review the attached swap confirmations (Exhibits 10.1 through 10.4) for termination clauses and potential costs.
- Monitor future LIBOR fluctuations to assess the economic benefit of the fixed rates secured (approx. 2.49% - 2.53%).
- Confirm the company's overall leverage ratio given the $250 million hedged portion of the debt.