Forest City outlines new terms for $425 million replacement revolver

By Susanna Moon

Chicago, April 5 - Forest City Rental Properties Corp. disclosed more information about its $425 million three-year revolving credit facility with a 13-member bank group, which replaces its revolver due February 2012, in an 8-K filing with the Securities and Exchange Commission.

The interest rate is Libor plus 375 basis points and the Libor floor was reduced to 1%.

The revised credit agreement pushes out the maturity by three years from March 30.

As previously noted on March 31, the facility has a one-year extension option and allows for additional banks to join the group for up to a maximum line of $450 million.

The wholly owned subsidiary of Forest City Enterprises, Inc. entered into a third amended credit agreement on March 30 with KeyBank NA as administrative agent, PNC Bank, NA as syndication agent and Bank of America, NA as documentation agent.

New details include the following replacement terms:

• Includes a reserve of $46,891,000 to be used to retire other debt as approved by the banks;

• Reduces the swing loans available to the lesser of $25 million or 6.0% of the total revolving loan commitments under the revolving line of credit;

• Removes restrictions on the use of cash sources and generally allows the facility proceeds to be used for general corporate purposes and working capital;

• Requires compliance with a minimum FCRPC debt yield covenant after Jan. 31, 2013 of 9.0%;

• Increases the borrower debt service coverage ratio to 1.35x for the period from closing through Jan. 31, 2013, 1.40x for the period from Feb. 1, 2013 through Jan. 31, 2014 and 1.45x for the period from Feb. 1, 2014 and thereafter;

• Increases the company cash flow coverage ratio to 2.50x for the period from closing through Jan. 31, 2013, 2.75x for the period from Feb. 1, 2013 through Jan. 31, 2014 and 3.00x for the period from Feb. 1, 2014 and thereafter;

• Allows the company to issue up to $150 million of new unsecured senior notes;

• Permits refinancing some senior notes for a redemption;

• Allows the company to retire or repay up to $200 million of some senior notes during the term of the credit facility provided that the notes are retired or repaid at a discount to par;

• Permits the company to declare or pay dividends of up to $20 million total in any four fiscal quarter period to holders of class A or class B common stock provided that no event of default has occurred; and

• Requires compliance with corporate development limitations under (a) a total development ratio of 17% provided that a one-time surge to a maximum of 18.5% for up to two consecutive fiscal quarters is available; and (b) an adjusted total development ratio of 25%.

The company announced the replacement revolver on March 31. Eleven banks that were members of the company's prior bank group, along with two new banks, are part of the new facility.

"This closing is an important step in preparing Forest City to take advantage of improving conditions in real estate and in the markets we serve," Charles A. Ratner, Forest City president and chief executive officer, said in the March 31 press release.

"The new line has more favorable pricing and covenants, as well as a longer term with an extension option, all of which will be beneficial in managing our business going forward and taking advantage of future growth opportunities."

Forest City is a Cleveland-based owner, developer, manager and acquirer of commercial and residential real estate properties.

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