The Partnership Agreement Amendment sets forth the terms of the Preferred Units. The Preferred Units provide for quarterly distributions on the $100.00 per unit issue price of 3.00% per year. Subject to certain limitations, each Preferred Unit will be exchangeable at any time after its issuance date into that number of shares of the Company’s common stock (“Common Stock”) equal to the quotient obtained by dividing $100.00 by $164.00 (as such ratio is subject to adjustment for certain capital events). The Preferred Units rank (i) senior to the Operating Partnership’s outstanding common OP units and Series A-3 Preferred Units, and (ii) junior to the Operating Partnership’s outstanding Preferred OP Units, Series A-1 Preferred Units, Series A-4 Preferred Units, Series C Preferred Units, Series D Preferred Units, Series E Preferred Units, Series F Preferred Units, Series G Preferred Units and any other partnership units that specifically provide that they will rank senior to the Preferred Units. Subject to certain limitations, the holders of Preferred Units will have the right to cause the Operating Partnership to redeem all or a portion of their Preferred Units for $100.00 per unit (plus any accrued but unpaid distributions) any time after the earlier of: (i) the fifth anniversary of the issuance date of the Preferred Units; or (ii) if the holder of the Preferred Units is a natural person, after receipt of the notice of the death of such holder.
At the closing of the Merger, the Company and holders of all 581,407 Preferred Units entered into the Registration Rights Agreement under which the Company has granted customary registration rights with respect to the shares of Common Stock underlying such Merger Securities. Under the terms of the Registration Rights Agreement, within 60 days after the closing of the Merger, the Company will use its commercially reasonable efforts to register the resale of the shares of Common Stock underlying the Merger Securities subject to the Registration Rights Agreement. Holders of the Merger Securities subject to the Registration Rights Agreement are also entitled to customary underwritten offering registration rights subject to certain terms and conditions.
All recipients of the Merger Securities have agreed not to sell or otherwise dispose of the Merger Securities or the shares of Common Stock issued upon the exchange of the Merger Securities for a period of 18 months after the closing of the Merger, subject to certain limited exceptions.
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The foregoing description of the Registration Rights Agreement and the Partnership Agreement Amendment does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the applicable documents, copies of which are attached hereto as Exhibits 4.1 and 10.1, and the terms of which are incorporated by reference herein.
| Item 2.03 | Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant. |
Safe Harbor, as borrower, is a party to a Credit Agreement dated September 14, 2018 (as amended, the “Credit Agreement”) with SHM TRS, LLC (“SHM TRS”) and certain of Safe Harbor and SHM TRS’s subsidiaries, as guarantors, Citizens Bank, N.A. (“Citizens”), as Administrative Agent and Collateral Agent, and certain other lender parties. The Credit Agreement was amended upon the closing of the Merger on October 30, 2020. SHM TRS is an indirect subsidiary of the Company. SHM TRS and its subsidiaries are taxable REIT subsidiaries that hold assets used in connection with Safe Harbor’s business.
Pursuant to the Credit Agreement, Safe Harbor may borrow up to $1.0 billion under a senior credit facility, comprised of a $500.0 million revolving loan and a $500.0 million term loan (the “Safe Harbor Facility”). The Credit Agreement also permits Safe Harbor to request an increase to the revolving commitments and/or to establish additional term loans, with the existing lenders or new lenders, subject to the satisfaction of certain conditions, in an aggregate amount not to exceed $350.0 million. As of October 30, 2020, $500.0 million was outstanding under the term loan and approximately $329.3 million was outstanding on the revolving loan under the Safe Harbor Facility, (inclusive of $298 thousand in standby obligations under letters of credit). The maturity date for the Safe Harbor Facility is October 11, 2024 and, at Safe Harbor’s option, the maturity date for the term loan may be extended for two additional twelve-month periods, subject to the satisfaction of certain conditions. The Safe Harbor Facility bears interest at a floating rate based on an adjusted LIBOR rate or a base rate, plus a margin that is determined based on Safe Harbor’s ratio of consolidated funded debt to total asset value, calculated in accordance with the Credit Agreement, which margin can range from 1.375% to 2.250% for adjusted LIBOR rate loans and 0.375% to 1.250% for base rate loans. Based on Safe Harbor’s current ratio of consolidated funded debt to total asset value, the current margin is 2.00% on any adjusted LIBOR rate loans and 1.000% on any base rate loans. The Safe Harbor Facility is secured by the personal property of Safe Harbor, SHM TRS and certain of their subsidiaries and a pledge of the equity interests in certain subsidiaries of Safe Harbor, as well as a pledge of the Company’s indirect equity interests in SHM TRS and certain of its subsidiaries, subject to customary exceptions. At the lenders’ option, the Safe Harbor Facility will become immediately due and payable upon an event of default that is continuing under the Credit Agreement.
The Credit Agreement also contains representations and warranties, affirmative and negative covenants and events of default that the Company considers customary for similar agreements, including specified financial covenants that require Safe Harbor to maintain at the end of each fiscal quarter a Consolidated Funded Debt to Total Asset Value of no greater than 55%, a Consolidated Pre-Distribution Fixed Charge Coverage Ratio of no less than 1.35:1.00, a Consolidated Post-Distribution Fixed Charge Coverage Ratio of no less than 1.00:1.00, and a Borrowing Base Coverage Ratio of no less than 1.00:1.00 (as these terms are defined in the Credit Agreement).
The foregoing description of the Credit Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Credit Agreement and the second amendment thereto, a copy of which is attached hereto as Exhibit 10.2, and the terms of which are incorporated by reference herein.
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