Business Context and Reporting Period
Company: Colony Credit Real Estate, Inc. (CLNC)
Filing Type: Form 8-K (Current Report)
Date of Report: November 2, 2018
Event: Entry into a Material Definitive Agreement and creation of a direct financial obligation.
Key Financial Metrics and Agreement Terms
This filing details a new financing facility rather than periodic financial performance results. Key terms include:
- Facility Size: Up to $300.0 million revolving credit facility.
- Counterparty: Wells Fargo Bank, National Association.
- Collateral: First mortgage loans, senior loan participations, and other commercial mortgage loan debt instruments secured by commercial real estate.
- Interest Rate: One-month London Interbank Offered Rate (LIBOR) plus a case-by-case spread.
- Maturity: Initial maturity of November 2, 2021, with two one-year extension options.
- Guaranty Liability: Maximum liability capped at 25% of amounts due for core purchased assets and 50% for flex purchased assets.
Material Changes and Covenants
The filing establishes new financial covenants that the Guarantor (Credit RE Operating Company, LLC) must maintain:
- Liquidity: Minimum of the lower of $50.0 million or the greater of $10.0 million and 5% of recourse indebtedness.
- Tangible Net Worth: Not less than $2,105.0 million plus 75% of net cash proceeds from future equity issuances.
- Indebtedness Ratio: Indebtedness not to exceed 75% of total assets.
- Interest Coverage: EBITDA to consolidated interest expense ratio of not less than 1.40 to 1.00.
The filing text does not provide comparative financial metrics (revenue, profit, cash flow) for the current period versus the prior period, as this is a transaction-specific report.
Outlook, Risks, and Contingencies
Management includes a Safe Harbor statement regarding forward-looking statements. Key risks and contingencies identified include:
- Ability to comply with representations, warranties, and covenants in the Repurchase Agreement.
- Ability to maintain minimum liquidity and equity ratios required by the agreement.
- Availability of investment opportunities and capital.
- Impact of future property values and investment losses on cash flow.
- Changes in economic conditions, real estate markets, and REIT regulations.
Investor Verification Checklist
- Verify the specific spread over LIBOR applicable to the $300.0 million facility.
- Confirm the company's current tangible net worth against the $2,105.0 million covenant threshold.
- Review the definition of "core purchased assets" versus "flex purchased assets" to understand the 25% vs. 50% guaranty liability exposure.
- Monitor the company's ability to maintain the 1.40x EBITDA to interest expense coverage ratio.
- Check subsequent filings for any drawdowns or utilization of the new facility.