Centerline amends credit facilities, anticipates covenant compliance

By Angela McDaniels

Tacoma, Wash., Feb. 22 - Centerline Holding Co. and Centerline Capital Group LLC amended and restated their revolving credit facility and term loan credit agreement, according to an 8-K filing with the Securities and Exchange Commission.

As a result of the amendment, the borrowers believe they will be able to maintain compliance with all of the covenants in the credit agreement for the foreseeable future.

Among other things, the amendment:

• Permanently waives past defaults of the borrowers related to their compliance with the consolidated EBITDA-to-fixed charge ratio and the total debt-to-consolidated EBITDA ratio covenants;

• Amended the consolidated EBITDA-to-fixed charge ratio covenant to increase the required ratio during specified periods beginning with the quarter ending June 30, 2014 and provides that, with respect to the four consecutive fiscal quarters ending Dec. 31, 2013, if the ratio is greater than 0.85 to 1.0 during such periods but less than the required 1.25 to 1.0, no covenant breach will occur so long as $500,000 or $1 million (depending on the amount of the shortfall in the ratio) of the outstanding balance of the term loan is prepaid;

• Amended the total debt-to-consolidated EBITDA ratio covenant to permit a higher ratio for the quarter ended March 31, 2014 and to require lower ratios in future periods and provides that, for the quarter ending Dec. 31, 2013, if Centerline's ratio is less than 8.5 to 1.0 but greater than the required 5.5 to 1.0, no covenant breach will occur so long as $500,000 or $1 million (depending on the amount of the shortfall in the ratio) of the outstanding balance of the term loan is prepaid;

• Amended some defined terms that will, among other things, allow Centerline to calculate its consolidated EBITDA on a GAAP basis rather than a current cash basis in some instances and exclude some items such as undrawn letters of credit (other than loss reserves for such letters of credit) from the calculation of total debt;

• Allows Centerline to stop SEC reporting and "go private" by implementing a reverse stock split, a related forward stock split and the repurchase of fractional shares in an amount not to exceed $2 million;

• Required Centerline to redeem all of its series A convertible Community Reinvestment Act preferred shares held by TD Bank, NA;

• Allows the company to use the $25 million credit facility portion of the credit agreement for general corporate purposes; provided, however, that the outstanding balance of the credit facility to be used for general corporate purposes may not exceed (x) $17.5 million from Feb. 15, 2013 through Feb. 15, 2014, (y) $15 million from Feb. 16, 2014 through Dec. 31, 2014 and (z) $10 million from Jan. 1, 2015 through the March 4, 2015 maturity date;

• Waived any default that may have resulted from the borrowers' failure to timely repay amounts due under the $25 million credit facility with respect to low income housing tax credit investments, which totaled about $11.1 million as of Feb. 15, while requiring the company to repay the outstanding amounts by Aug. 15, except roughly $2 million that may, under some circumstances, be repaid by Jan. 15, 2014;

• Provides that Bank of America, NA, as issuing bank, is no longer required to issue new letters of credit;

• Amends some financial reporting requirements for Centerline and some of its affiliates, including eliminating the requirement that the borrowers provide Bank of America with audited annual financial statements for Centerline. Some subsidiaries are still required to provide them;

• Provides that upon the earliest to occur of (i) the first business day following the end of the fiscal quarter in which Centerline first achieves a total debt-to-consolidated EBITDA ratio of 3 to 1 or less and (ii) Jan. 1, 2015, the applicable margin of the term loan portion will increase to 350 basis points from 300 bps, with subsequent 50 bps increases on each yearly anniversary;

• Allows Centerline and some of its subsidiaries to make some additional investments; and

• Limits the amount of equity that may be granted by Centerline and some of its subsidiaries to their respective directors, officers employees, consultants or other persons to no more than 20% of that entity's fully diluted equity.

Bank of America is the administrative agent. Banc of America Securities, LLC and Citicorp USA, Inc. are the co-lead arrangers, and Banc of America Securities is book manager.

The borrowers, Bank of America, Morgan Stanley Senior Funding, Inc., MLBUSA Community Development Corp., CIBC Inc. and Comerica Bank entered into the amendment on Feb. 15.

Centerline is a New York-based provider of real estate finance and asset management services for multifamily housing.

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