FRANKLIN STREET PROPERTIES CORP / MA /: entering into a material definitive agreement, creating a direct financial obligation or obligation under an off-balance sheet arrangement of a registrant, financial statements and supporting documents (Form 8- K)
ITEM 1.01. The conclusion of an important definitive agreement.
New revolving line of credit
exceptional at all times. Borrowings made under the BofA Revolver may be borrowed, repaid and re-borrowed from time to time until the due date at
BofA Revolver borrowings bear interest at a higher margin either (i) the simple daily guaranteed overnight rate (“SOFR”), plus an adjustment of 0.11448%, or (ii) at One, three or six month SOFR plus a corresponding adjustment of 0.11448%, 0.26161% or 0.42826%, respectively. In addition, in certain circumstances, for example if the SOFR cannot be determined, the Revolver BofA will instead charge interest at a margin above a specified base rate. The margin on the SOFR or, where applicable, the base rate varies according to the Company’s leverage ratio (1.950% on the SOFR and 0.950% on the base rate at
Daily SOFR Rate Loans, Term SOFR Loans and
Level Leverage Ratio Letter of Credit Fees Facility Fee Base Rate Loans
I < 35.00% 1.550% 0.300% 0.550% ? 35.00% - II < 40.00% 1.650% 0.300% 0.650% ? 40.00% - III < 45.00% 1.750% 0.350% 0.750% ? 45.00% - IV < 50.00% 1.950% 0.350% 0.950% ? 50.00% - V < 55.00% 2.150% 0.350% 1.150% VI ? 55.00% 2.350% 0.400% 1.350%
In the event that the Company is assigned an investment grade credit rating, the Company has the sole right to choose to convert to a different credit-based pricing grid with the following annual percentages:
Daily SOFR Rate Loans, Term SOFR Loans and
Level Credit Rating Letter of Credit Commissions Facility Commission Base Rate Loans
I A-/A3 (or higher) 0.725% 0.125% 0.000% II BBB+/Baa1 0.775% 0.150% 0.000% III BBB/Baa2 0.850% 0.200% 0.000% IV BBB-/Baa3 1.050% 0.250% 0.050% V
Base Rate means, for any day, an annual fluctuating rate equal to the greater of the following: (i) the interest rate in effect for that day, as publicly announced from time to time by the Administrative Officer as its “prime rate”, (ii) the federal funds rate plus 1/2 of 1% (0.50%), (iii) the one-month SOFR term plus 1.00% and (iv) 1, 00%. If the base rate is used because SOFR cannot be determined, the base rate is the greater of clauses (i), (ii) and (iv).
The credit agreement contains customary and negative covenants for credit facilities of this type, including limitations on indebtedness, liens, investments, mergers and acquisitions, disposal of assets, changes of activity, certain restricted payments, the obligation for subsidiaries to provide security in the event of claims and transactions with affiliates. The credit agreement also contains financial covenants that require the Company to maintain a minimum tangible equity, a maximum leverage ratio, a maximum guaranteed leverage ratio, a minimum fixed charge coverage ratio, a financial leverage ratio. maximum unencumbered and a minimum unsecured interest coverage ratio. The credit agreement also restricts the ability of the Company to make dividend distributions in excess of 95% of the Company’s good faith estimate of projected operating funds for the relevant year; provided, however, that notwithstanding any such restriction, the Company is permitted to make dividend distributions based on the Company’s good faith estimate of the projected or estimated taxable income or otherwise as necessary to maintain the status of the Company 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 tax to which the Company would otherwise be subject.
The credit agreement provides for customary events of default with corresponding grace periods, including non-payment of principal or interest when due, non-compliance with the provisions of the credit agreement, certain cross defaults and a change of control of the Company (as defined in the credit agreement). In the event of default by the Company,
BofA, in its capacity as administrative agent, may, and at the request of the required number of lenders, declare all obligations under the Credit Agreement immediately due and payable and assert all rights of the lenders or BofAunder the credit agreement and related documents. For certain events of default relating 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 estate and for other permitted investments; to fund investments associated with sponsored REITs (as defined in the company’s annual report on Form 10-K for the fiscal year ended
December 31, 2020), to refinance or repay debt and for working capital and other general business purposes, in each case to the extent permitted by the credit agreement.
Certain of the lenders party to the Credit Agreement, and their respective affiliates, have provided, and may in the future provide for the Company and its subsidiaries, various commercial banking, investment banking, underwriting and other banking services. financial advice, for which they have received, and will collect the usual 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 full text of the credit agreement.
Old revolving line of credit
Effective simultaneously with the closing of the BofA Revolver on
January 10, 2022, the Company has sent a notice (the “Early Termination Notice”) to BofA
terminate the lender’s total commitments under its old revolving line of credit for borrowings up to
$ 600,000,000(the “Old BofA Revolver”) in their entirety. There was no outstanding loan under the old BofA revolver. The old BofA revolver was evidenced by this second modified and updated credit agreement dated October 29, 2014, among the Company, BofA
as administrative agent, an issuer of letters of credit, a line of credit lender and a lender, and other credit institutions party thereto (as amended, the “Credit Facility Agreement”). If the Company had not delivered the Notice of Early Termination, the Old BofA Revolver would have expired on its own terms on
January 12, 2022. The Credit Facility Agreement also attests to a $ 400,000,000
term loan (the “BofA Term Loan”) which was previously advanced to the Company, approximately
$ 110,000,000of which remained unpaid at December 31, 2021. The BofA term loan matures on January 12, 2023.
ITEM 2.03. Creation of a direct financial obligation or obligation under an off-balance sheet arrangement of a registrant.
The information under Item 1.01 of this current report on Form 8-K is incorporated into this Item 2.03 by reference.
ARTICLE 9.01. Financial statements and supporting documents.
The following documents are attached:EXHIBIT NO. DESCRIPTION OF EXHIBITS 10.1 Credit Agreement, dated
January 10, 2022, among Franklin Street Properties Corp., Bank of America, N.A., and the other parties thereto. 104 Cover Page Interactive Data File (embedded within the Inline XBRL document)
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