First Potomac Realty cuts pricing on $600 million revolver, term loans

By Susanna Moon

Chicago, Dec. 8 – First Potomac Realty Trust’s operating partnership First Potomac Realty Investment LP cut interest on its $600 million revolving facility and term loans and modified some of the loan terms.

The company amended its credit agreement last Friday with KeyBank NA as administrative agent, extending the maturity, according to an 8-K filing with the Securities and Exchange Commission.

The amended agreement also consolidates a $300 million unsecured revolving credit facility and a $300 million unsecured term loan facility, consisting of a $100 million tranche A term loan, a $100 million tranche B term loan and a $100 million tranche C term loan.

The company also reduced the capitalization rates used in the calculation of some asset values for purposes of the financial covenants; eliminated the negative covenant concerning investment limitations; and added capacity under the restricted payments covenant to redeem the series A preferred shares.

The agreement also contains an accordion feature that allows for future expansion of the aggregate commitments by up to an additional $300 million with lender commitments.

Revolver terms

The revolver has an initial maturity date of Dec. 4, 2019 and provides for two six-month extension options.

Interest on the revolving loans is Libor plus 135 basis points to 210 bps, based on leverage, down from 150 bps to 205 bps under the previous loan terms.

If the company obtains a credit rating of at least BBB-/Baa3 on its senior unsecured long-term debt by Standard & Poor’s or Moody’s Investors Service, the operating partnership may make a one-time irrevocable election to have the interest rate on all borrowings determined on the basis of the credit rating level of Libor plus 85 bps to 155 bps, down from 97.5 bps to 175 bps.

The unused fee is now 12.5 bps to 30 bps, reduced from 15 bps or 25 bps.

At closing, the operating partnership had drawn $170 million under the revolver.

Term loan details

The tranche A, tranche B and tranche C term loans mature on Dec. 4, 2020, May 4, 2021 and Dec. 4, 2022, respectively.

Interest will be Libor plus 130 bps to 205 bps for the tranche A and B loans, reduced from 145 bps to 200 bps, and Libor plus 160 bps to 240 bps for the tranche C loans, down from 190 bps to 255 bps, in each case based on leverage.

If the achieves investment-grade ratings, the rate would drop to Libor plus 92.5 bps to 175 bps for the tranche A and B loans and 135 bps to 230 bps for the tranche C loans.

The company may prepay any tranche A or tranche B term loans without premium or penalty. Tranche C loans require prepayment premiums of 2% if the prepayment occurs during the first year after closing and 1% in the second year. After that, the tranche C term loan may be prepaid without premium or penalty.

More details

The financial covenants are substantially similar to those included in the previous agreements:

• Total debt of no more than 60% or, if a material acquisition occurs, 65% for up to two consecutive fiscal quarters, of gross asset value;

• Secured debt of no more than 40% of gross asset value;

• A minimum fixed charge coverage ratio of adjusted EBITDA to fixed charges of at least 1.5 times;

• A minimum tangible net worth (defined as gross asset value less total indebtedness) of not less than (i) $601,201,775, plus (ii) 80% of the net proceeds of certain future equity issuances by the company;

• A maximum unencumbered leverage ratio of unsecured debt to the value of unencumbered properties of 60% or, if a material acquisition occurs, 65% for up to two consecutive fiscal quarters; and

• A minimum unencumbered interest coverage ratio of the adjusted net operating income of unencumbered properties to interest expense on unsecured debt of at least 1.75 times.

First Potomac is a Bethesda, Md.-based real estate investment trust that focuses on industrial properties and business parks in the Washington, D.C., metropolitan area.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.