Base rate means, for any day, a fluctuating rate per annum equal to the highest of: (i) the rate of interest in effect for such day as publicly announced from time to time by the administrative agent as its “prime rate”, (ii) the Federal Funds Rate plus 1/2 of 1% (0.50%), (iii) term SOFR for one month plus 1.00% and (iv) 1.00%. If the base rate is being used because SOFR is not able to be determined, base rate is the greater of clauses (i), (ii) and (iv).
The Credit Agreement contains customary affirmative and negative covenants for credit facilities of this type, including limitations with respect to indebtedness, liens, investments, mergers and acquisitions, disposition of assets, changes in business, certain restricted payments, the requirement to have subsidiaries provide a guaranty in the event that they incur recourse indebtedness and transactions with affiliates. The Credit Agreement also contains financial covenants that require the Company to maintain a minimum tangible net worth, a maximum leverage ratio, a maximum secured leverage ratio, a minimum fixed charge coverage ratio, a maximum unencumbered leverage ratio and a minimum unsecured interest coverage ratio. The Credit Agreement also restricts the Company’s ability to make dividend distributions that exceed of 95% of the Company’s good faith estimate of projected funds from operations for the applicable fiscal year; provided, however, that notwithstanding such restriction, the Company is permitted to make dividend distributions based on the Company’s good faith estimate of projected or estimated taxable income or otherwise as necessary to retain the Company’s status as a real estate investment trust, to meet the distribution requirements of Section 857 of the Internal Revenue Code or to eliminate any income or excise taxes to which the Company would otherwise be subject.
The Credit Agreement provides for customary events of default with corresponding grace periods, including failure to pay any principal or interest when due, failure to comply with the provisions of the Credit Agreement, certain cross defaults and a change in control of the Company (as defined in the Credit Agreement). In the event of a default by the Company, BofA, in its capacity as administrative agent, may, and at the request of the requisite number of lenders shall, declare all obligations under the Credit Agreement immediately due and payable and enforce any and all rights of the lenders or BofA under the Credit Agreement and related documents. For certain events of default related to bankruptcy, insolvency, and receivership, all outstanding obligations of the Company will become immediately due and payable.
The Company may use the net proceeds of the BofA Revolver to finance the acquisition of real properties and for other permitted investments; to finance investments associated with Sponsored REITs (as defined in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020), to refinance or retire indebtedness and for working capital and other general business purposes, in each case to the extent permitted under the Credit Agreement.
Certain of the lenders party to the Credit Agreement, and their respective affiliates, have performed, and may in the future perform for the Company and its subsidiaries, various commercial banking, investment banking, underwriting and other financial advisory services, for which they have received, and will receive, customary fees and expenses.
The Credit Agreement is attached to this Current Report on Form 8-K as Exhibit 10.1. The foregoing summary of the Credit Agreement is qualified in its entirety by the complete text of the Credit Agreement.
Former Revolving Line of Credit
Effective simultaneously with the closing of the BofA Revolver on January 10, 2022, the Company delivered a notice (the “Early Termination Notice”) to BofA terminating the aggregate lender commitments under its former revolving line of credit for borrowings up to $600,000,000 (the “Former BofA Revolver”) in their entirety. There were no borrowings outstanding under the Former BofA Revolver. The Former BofA Revolver was evidenced by that certain Second Amended and Restated Credit Agreement dated as of October 29, 2014, among the Company, BofA as administrative agent, a letter of credit issuer, a swing line lender and a lender, and the other lending institutions party thereto (as amended, the “Credit Facility Agreement”). If the Company had not delivered the Early Termination Notice, the Former BofA Revolver would have matured by its own terms on January 12, 2022. The Credit Facility Agreement also evidences a $400,000,000 term loan (the “BofA Term Loan”) that was previously advanced to the Company, approximately $110,000,000 of which remained outstanding as of December 31, 2021. The BofA Term Loan matures on January 12, 2023.
