| Entry into a Material Definitive Agreement. |
On October 3, 2022, Kilroy Realty, L.P. (the “Operating Partnership”) entered into a term loan agreement (the “Term Loan Agreement”), that provides for an unsecured delayed draw term loan facility (the “Term Loan Facility”), with the lenders from time to time party thereto, JPMorgan Chase Bank, N.A., as administrative agent, JPMorgan Chase Bank, N.A., BofA Securities, Inc., PNC Capital Markets LLC, U.S. Bank National Association and The Bank of Nova Scotia, as joint lead arrangers and joint bookrunners, Bank of America, N.A., as a lender and syndication agent, PNC Bank, National Association, U.S. Bank National Association and The Bank of Nova Scotia, as lenders and
co-documentation
agents. The Term Loan Facility provides for borrowings of up to $400 million. The Term Loan Facility also includes an accordion feature to increase the term loan commitments or add one or more tranches of term loans up to an aggregate amount of $500 million, subject to obtaining lender commitments and the satisfaction of certain customary conditions. The Term Loan Facility is guaranteed by Kilroy Realty Corporation (the “Company”).
The Term Loan Facility provides that the term loans will bear interest, at the Operating Partnership’s option, at a rate of (x) a term SOFR-based floating interest rate option plus an applicable margin ranging from 0.80% to 1.60%, including a credit spread adjustment of 0.10%, and (y) a base rate interest rate option plus an applicable margin ranging from 0.00% to 0.60%, in each case depending on the corporate credit rating of our long-term senior unsecured debt. The Operating Partnership is also obligated to pay an unused ticking fee on the aggregate unused term loan commitments under the Term Loan Facility ranging from 12.5 basis points to 30 basis points depending on the corporate credit rating of our long-term senior unsecured debt.
The Operating Partnership is required to comply with the following financial covenants under the Term Loan Facility:
| | • | | Maximum total debt to total asset value of less than 60%; |
| | • | | Fixed charge coverage ratio of greater than 1.5x; |
| | • | | Unsecured debt ratio of greater than 1.67x; and |
| | • | | Unencumbered asset pool debt service coverage of greater than 1.75x. |
The Term Loan Facility provides for borrowings in U.S. dollars. The Term Loan Facility has a maturity date of October 3,
2026, which
reflects
two
1-year
extension options at the Operating Partnership’s option; provided, that the Operating Partnership must pay a 12.5 basis point extension fee based on the then outstanding principal amount of the term loans for the first extension and a 15 basis point extension fee based on the then outstanding principal amount of the term loans for the second extension.
The Term Loan Agreement contains customary affirmative and negative covenants that, among other things, limit the ability of the Company to pay dividends and enter into certain transactions. A breach of such covenants (after notice and cure periods in certain circumstances) or any other event of default would entitle the administrative agent to accelerate the Operating Partnership’s debt obligations.
In connection with the Term Loan Facility, the Company entered into a guaranty (the “Guaranty”) pursuant to which it has absolutely, irrevocably and unconditionally guaranteed to the administrative agent under the Term Loan Facility for the benefit of the lenders party to the Term Loan Facility, the payment and performance of the obligations of the Operating Partnership under the Term Loan Facility as and when due and payable.
As previously disclosed, on April 21, 2021, the Operating Partnership entered into an amended and restated revolving credit agreement (as amended, restated, supplemented or otherwise modified from time to time, the “Revolving Credit Agreement”), which governs an unsecured revolving credit facility (the “Revolving Credit Facility”), with the lenders from time to time party thereto, JPMorgan Chase Bank, N.A., as administrative agent, JPMorgan Chase Bank, N.A., BofA Securities, Inc., Wells Fargo Securities, LLC, as joint lead arrangers and joint bookrunners, PNC Capital Markets LLC and U.S. Bank National Association, as joint lead arrangers, Bank of America, N.A., as a lender and syndication agent, Wells Fargo Bank, N.A., PNC Bank, National Association, U.S. Bank National Association, Bank of the West, Barclays Bank PLC, MUFG Union Bank, N.A., Sumitomo Mitsui Banking Corporation and The Bank of Nova Scotia, as lenders and
co-documentation
agents.
On October 3, 2022 the Operating Company entered into an amendment to the Revolving Credit Agreement (the “Amendment”). The Amendment replaced the LIBOR-based and daily LIBOR-based floating interest rate options with a term SOFR-based floating interest rate option and a daily SOFR-based floating interest rate option as benchmark rates for borrowings denominated in U.S. dollars for all purposes under the Credit Agreement, including, in each case, a credit spread adjustment of 0.10%.
