Franklin Street extends revolver and term loan, updates interest rates

By Marisa Wong

Los Angeles, Feb. 10 – Franklin Street Properties Corp. entered into a first amendment on Feb. 10 to its credit agreement dated Jan. 10, 2022 with Bank of America, NA as administrative agent to amend its existing revolving line of credit, according to an 8-K filing with the Securities and Exchange Commission.

The amendment extends the maturity date to Oct. 1, 2024 from Jan. 12, 2024; reduces availability for borrowings to up to $150 million from up to $237.5 million; and changes the interest rate to SOFR plus 300 basis points from a rate of SOFR plus a margin based on the company’s credit rating.

Effective Oct. 1, 2023, availability under the revolver will be reduced to $125 million; and effective April 1, 2024, availability will be further reduced to $100 million.

As of Feb. 10, there were borrowings of $105 million drawn and outstanding under the revolver, including a $40 million borrowing made on the amendment date to repay a portion of the company’s BMO term loan (described below).

As a result of entering into the revolver amendment, the company incurred a loss on extinguishment of debt of $400,000 related to unamortized deferred financing costs.

In addition, the amendment modified some covenants and added a new maximum secured recourse leverage ratio.

The amendment allows the company to use proceeds of the revolver for permitted investments and for working capital and other general business purposes, including for building improvements, tenant improvements and leasing commissions.

BMO term loan

Also on Feb. 10, the company entered into a first amendment to its second amended and restated credit agreement dated Sept. 27, 2018 with Bank of Montreal as administrative agent.

The amendment, among other things, extends the maturity date to Oct. 1, 2024 from Jan. 31, 2024 and changes the interest rate to SOFR plus 300 bps from Libor plus a margin based on the company’s credit rating.

The amendment also reset the tangible net worth covenant and added a new maximum secured recourse leverage ratio.

The term loan was initially for an unsecured term loan borrowing in the amount of $220 million, of which $125 million remains outstanding.

The term loan initially consisted of a $55 million tranche A term loan and a $165 million tranche B term loan. On June 4, 2021, the company repaid the tranche A term loan that was scheduled to mature on Nov. 30, 2021 and incurred a loss on extinguishment of debt of $100,000 related to unamortized deferred financing costs. On Feb. 10, as part of the amendment, the company repaid a $40 million portion of the $165 million tranche B term loan, so that $125 million remains outstanding.

On or before April 1, 2024, the company is required to repay an additional $25 million of the term loan.

The tranche B term loan matures on Oct. 1, 2024.

Prior to the effectiveness of the amendment, in 2019 the company had entered into interest rate swap transactions to fix Libor. On Feb. 8, the company terminated all remaining interest rate swaps applicable to the term loan. On the amendment date, the company received an aggregate of about $4.3 million as a result of those terminations.

Franklin Street is a real estate investment trust company based in Wakefield, Mass.

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