ITEM 1.01 Entry into a Material Definitive Agreement.
On June 3, 2011, Associated Estates Realty Corporation (the "Company") entered into a $125 Million Senior Unsecured Term Loan (the "Term Loan"). Proceeds from the Term Loan were used to pay down borrowings outstanding on the Company's Unsecured Revolving Credit Facility and for general corporate purposes. The Term Loan initially bears interest at LIBOR plus a spread of 180 basis points. The Company has the option to elect, from time to time, interest rates applied to up to three separate tranches of amounts outstanding under the Term Loan of one, two, three or six month LIBOR plus the LIBOR Margin or a Base Rate plus the Base Rate Margin. The interest rate margins are based upon a financial ratio. The LIBOR Margin may range between 180 and 255 basis points and the Base Rate Margin may range between 80 and 155 basis points. The Term Loan requires interest only payments until maturity in June 2016. The Company may prepay the Term Loan in whole or in part at any time after the first year without penalty. Amounts repaid during the first year will be subject to a fee of 50 basis points. Amounts repaid under the Term Loan may not be reborrowed. The Term Loan was secured through PNC Capital Markets LLC, acting as Lead Arranger and PNC Bank, National Association, acting as Administrative Agent. Wells Fargo Bank, N.A. acted as Syndication Agent and U.S. Bank, National Association as Documentation Agent. The other participating banks are Raymond James Bank, FSB, RBS Citizens, N.A., and Citibank, N.A. The Term Loan contains financial covenants that include, without limitation, a maximum debt limitation and ratios related to net worth, leverage, fixed charge coverage, unencumbered interest coverage, and dividend payments. The Term Loan includes other customary representations, warranties and covenants.
In connection with the closing of the Term Loan, certain modifications have been made to the Company’s Unsecured Revolving Credit Facility including a reduction in the definition of "Capitalization Rate" (used to determine borrowing eligibility and leverage) from 7.50% to 7.25%.
Citibank, N.A., PNC Bank, National Association, Raymond James Bank, FSB, RBS Citizens, N.A., U.S. Bank, National Association and Wells Fargo Bank, N.A. or their respective affiliates, have performed, and may in the future perform, various commercial banking, investment banking and other administrative services for the Company for which they have received, and will receive, customary fees and expenses.
ITEM 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
The contents of Item 1.01 of this Current Report on Form 8-K are incorporated into this Item 2.03 by reference.
ITEM 9.01 Financial Statements and Exhibits.
(d) Exhibits
Exhibit 4.1. Term Loan Agreement, dated June 3, 2011, between Associated Estates Realty Corporation and PNC Bank, National Association and the several banks, financial institutions and other entities. |
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Exhibit 4.2. First Amendment to Amended and Restated Credit Agreement dated June 3, 2011 between Associated Estates Realty Corporation and PNC Bank, National Association and the several banks, financial institutions and other entities. |
