| Item 1.01 | Entry into a Material Definitive Agreement. |
The information set forth in Item 2.03 of this Current Report on Form 8-K is hereby incorporated by reference into this Item 1.01.
| Item 2.03 | Creation of a Direct Financial Obligation under an Off-Balance Sheet Arrangement of a Registrant. |
On April 12, 2022, Sun Communities Operating Limited Partnership (the “Operating Partnership”), a Michigan limited partnership and subsidiary of Sun Communities, Inc., a Maryland corporation (the “Company”, and, together with the Operating Partnership, the “Obligors”), completed an underwritten public offering (the “Offering”) of $600 million in aggregate principal amount of its 4.200% Notes due 2032 (the “Notes”).
The Operating Partnership intends to use the net proceeds from the Offering of approximately $592.3 million after deducting the underwriting discount and estimated expenses related to the Offering payable by the Operating Partnership, to repay borrowings outstanding under its senior credit facility, to fund possible future acquisitions of properties, and for working capital and general corporate purposes.
The Notes are fully and unconditionally guaranteed by the Company. The terms of the Notes are governed by an indenture, dated as of June 28, 2021 (the “Base Indenture”), by and between the Operating Partnership and UMB Bank, N.A., as trustee (the “Trustee”), as amended and supplemented by a Third Supplemental Indenture, dated as of April 12, 2022, by and among the Obligors and the Trustee (the “Supplemental Indenture”, and, together with the Base Indenture, the “Indenture”). The Indenture contains covenants that limit the ability of the Operating Partnership and its subsidiaries to (a) consummate a merger, consolidation or sale of all or substantially all of their assets; and (b) incur secured and unsecured indebtedness. The Indenture also contains covenants regarding (i) provision of financial information, (ii) maintenance of properties, (iii) payment of taxes and other claims, and (iv) insurance.
Pursuant to the Underwriting Agreement among the Obligors and the underwriters named therein (the “Underwriters”) filed as Exhibit 1.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission (the “Commission”) on April 6, 2022, the purchase price paid by the Underwriters for the Notes was 98.792% of the principal amount thereof. The Notes are the Operating Partnership’s senior unsecured obligations and rank equally in right of payment with all of the Operating Partnership’s other existing and future senior unsecured indebtedness. The Notes are effectively subordinated in right of payment to: (i) all of the Obligors’ existing and future secured indebtedness; (ii) all existing and future indebtedness and other liabilities, whether secured or unsecured of the Obligors’ subsidiaries; and (iii) all preferred equity not owned by the Obligors, if any, in their respective subsidiaries. Interest on the Notes will accrue at the rate of 4.200% per annum and will be payable semi-annually in arrears on April 15 and October 15, beginning on October 15, 2022. The Notes will mature on April 15, 2032.
The Operating Partnership may, at its option, redeem the Notes, in whole or in part, at any time or from time to time prior to January 15, 2032, at a redemption price equal to the greater of:
| | • | | 100% of the principal amount of the Notes to be redeemed; or |
| | • | | a “make-whole” amount as defined and calculated in accordance with the Indenture; |
plus, in each case, accrued and unpaid interest thereon to the applicable redemption date.
On or after January 15, 2032, the Operating Partnership may, at its option, redeem the Notes, in whole or in part, at a redemption price equal to 100% of the principal amount of the Notes being redeemed, plus accrued and unpaid interest thereon to the applicable redemption date.
Certain events are considered events of default, which may result in the accelerated maturity of the Notes, including:
| | • | | failure to pay interest on the Notes when due, continued for 30 days; |
| | • | | failure to pay principal of, or premium, if any, on, the Notes when due; |
| | • | | failure by the Operating Partnership or the Company for 60 days after written notice from the Trustee or the holders of at least 25% in aggregate principal amount of the then outstanding Notes to comply with any of the other agreements of the Operating Partnership or the Company, respectively, in the Indenture with respect to the Notes; |
