| Item 1.01 | Entry into a Material Definitive Agreement. |
Master Repurchase and Securities Contract Agreement
On October 13, 2022, FS CREIT Finance MS-1 LLC (“MS-1”), an indirect wholly owned special-purpose financing subsidiary of FS Credit Real Estate Income Trust, Inc. (“FS CREIT”), entered into a Master Repurchase and Securities Contract Agreement (the “Repurchase Agreement,” and together with the related transaction documents, the “Facility”), as seller, with Morgan Stanley Mortgage Capital Holdings LLC (the “Agent”), as administrative agent for the buyers, and Morgan Stanley Bank, N.A., as a buyer, together with such other financial institutions from time to time party thereto as buyers (the “Buyers”), to finance the acquisition and origination of (i) whole, performing commercial mortgage loans and senior mortgage notes secured by a first lien on office, retail, industrial, hospitality, multifamily, self-storage or mixed-use property (such property, “Eligible Property”), (ii) pari passu participation interests in such performing mortgage loans, and (iii) performing mezzanine loans secured by pledges of 100% of the capital stock of the mortgagor under a related mortgage loan secured by a first lien on Eligible Property (collectively, “Eligible Assets”).
The Facility is uncommitted, so the Buyers have no obligation to enter into any transaction under the Facility to finance Eligible Assets. The initial maximum amount of financing available under the Facility is $150 million. MS-1 may elect to increase the maximum amount of financing available to $250 million so long as, subject to other customary conditions, no default or event of default has occurred or is continuing under the Facility.
The initial availability period of the Facility (during which financing under the Facility may be used for acquisition and origination of new assets) is three years. MS-1 may extend the availability period for a one-year term extension, so long as certain conditions are met.
In connection with the Repurchase Agreement, FS CREIT entered into a Guaranty (the “Guaranty”) pursuant to which FS CREIT guarantees 25% of MS-1’s obligations under the Repurchase Agreement, subject to limitations specified therein. The Guarantee may become full recourse to FS CREIT upon the occurrence of certain events, including willful bad acts by FS CREIT or MS-1.
The Repurchase Agreement and Guaranty contain representations, warranties, covenants, events of default and indemnities that are customary for agreements of their type. In addition, FS CREIT is required (i) to maintain its adjusted tangible net worth at an amount not less than 75% of the net cash proceeds of any equity issuance by FS CREIT minus 75% of the amounts expended for equity redemptions or repurchases by FS CREIT; (ii) to maintain an EBITDA to interest expense ratio not less than 1.50 to 1.00; (iii) to maintain a total indebtedness to tangible net worth ratio of less than 3.00 to 1.00; and (iv) to maintain minimum liquidity not less than the greater of (x) $15,000,000 and (y) 5% of the amount outstanding under the Facility.
Each transaction under the Facility to finance Eligible Assets will have its own specific terms, such as identification of the assets subject to the transaction, sale price, repurchase price and rate. In addition, any term of the Facility or the Guaranty may be amended in connection with any transaction.
The material terms of the agreements described above are qualified in their entirety by the agreement attached as Exhibits 2.1 and 2.2 to this Current Report on Form 8-K and incorporated herein by reference.
| Item 2.03 | Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant. |
The information contained in Item 1.01 of this Current Report on Form 8-K is incorporated by reference into this Item 2.03.
