Annual report pursuant to Section 13 and 15(d)

Unsecured Line of Credit and Term Notes

v3.8.0.1
Unsecured Line of Credit and Term Notes
12 Months Ended
Dec. 31, 2017
Debt Disclosure [Abstract]  
Unsecured Line of Credit and Term Notes

5. UNSECURED LINE OF CREDIT AND TERM NOTES

Borrowings outstanding on our unsecured line of credit and term notes are as follows:

 

( Dollars in thousands )

 

Dec. 31, 2017

 

 

Dec. 31, 2016

 

Revolving line of credit borrowings

 

$

105,000

 

 

$

253,000

 

 

 

 

 

 

 

 

 

 

Term note due June 4, 2020

 

 

100,000

 

 

 

325,000

 

Term note due August 5, 2021

 

 

100,000

 

 

 

100,000

 

Term note due April 8, 2024

 

 

175,000

 

 

 

175,000

 

Senior term note due July 1, 2026

 

 

600,000

 

 

 

600,000

 

Senior term note due December 15, 2027

 

 

450,000

 

 

 

 

Term note due July 21, 2028

 

 

200,000

 

 

 

200,000

 

Total term note principal balance outstanding

 

$

1,625,000

 

 

$

1,400,000

 

Less: unamortized debt issuance costs

 

 

(10,962

)

 

 

(9,323

)

Less: unamortized senior term note discount

 

 

(4,949

)

 

 

(3,152

)

Term notes payable

 

$

1,609,089

 

 

$

1,387,525

 

 

In January 2016, the Company exercised the expansion feature on its existing amended unsecured credit agreement and increased the revolving credit limit from $300 million to $500 million. The interest rate on the revolving credit facility bears interest at a variable annual rate equal to LIBOR plus a margin based on the Company’s credit rating (at December 31, 2017 the margin is 1.10%), and requires an annual 0.15% facility fee. The Company’s unsecured credit agreement also includes a $325 million unsecured term note maturing June 4, 2020. In 2017, the Company repaid $225 million under this term note, resulting in $100 million outstanding at December 31, 2017, with the term note bearing interest at LIBOR plus a margin based on the Company’s credit rating (at December 31, 2017 the margin is 1.15%). The interest rate at December 31, 2017 on the Company’s line of credit was approximately 2.63% (1.79% at December 31, 2016). At December 31, 2017, there was $395 million available on the unsecured line of credit. The revolving line of credit has a maturity date of December 10, 2019.

On December 7, 2017, the Operating Partnership issued $450 million in aggregate principal amount of 3.875% unsecured senior notes due December 15, 2027 (the “2027 Senior Notes”). The 2027 Senior Notes were issued at a 0.477% discount to par value. Interest on the 2027 Senior Notes is payable semi-annually on June 15 and December 15, beginning on June 15, 2018. The 2027 Senior Notes are fully and unconditionally guaranteed by the Parent Company. Proceeds received upon issuance, net of discount to par of $2.1 million and underwriting discount and other offering expenses totaling $4.0 million, totaled $443.9 million.

On June 20, 2016, the Operating Partnership issued $600 million in aggregate principal amount of 3.50% unsecured senior notes due July 1, 2026 (the “2026 Senior Notes”). The 2026 Senior Notes were issued at a 0.553% discount to par value. Interest on the 2026 Senior Notes is payable semi-annually in arrears on January 1 and July 1. The 2026 Senior Notes are fully and unconditionally guaranteed by the Parent Company. Proceeds received upon issuance, net of discount to par of $3.3 million and underwriting discount and other offering expenses of $5.5 million, totaled $591.2 million.

The indenture under which the 2027 Senior Notes and the 2026 Senior Notes were issued restricts the ability of the Company and its subsidiaries to incur debt unless the Company and its consolidated subsidiaries comply with a leverage ratio not to exceed 60% and an interest coverage ratio of more than 1.5:1 on all outstanding debt, after giving effect to the incurrence of the debt. The indenture also restricts the ability of the Company and its subsidiaries to incur secured debt unless the Company and its consolidated subsidiaries comply with a secured debt leverage ratio not to exceed 40% after giving effect to the incurrence of the debt. The indenture also contains other financial and customary covenants, including a covenant not to own unencumbered assets with a value less than 150% of the unsecured indebtedness of the Company and its consolidated subsidiaries. At December 31, 2017, the Company was in compliance with such covenants.

On May 17, 2016, the Company entered into two senior unsecured acquisition bridge facilities (the “Bridge Facilities”) totaling $1,675 million with the Company’s third-party advisors to the LS acquisition (see Note 4). In consideration for the bridge financing commitments, the Company paid fees totaling $7.3 million which are included as interest expense – bridge financing commitment fee in the 2016 consolidated statement of operations. The Bridge Facilities commitments were not drawn upon and were terminated on June 29, 2016.  

On July 21, 2016, the Company entered into a $200 million term note maturing July 21, 2028 bearing interest at a fixed rate of 3.67%.

On April 8, 2014, the Company entered into a $175 million term note maturing April 2024 bearing interest at a fixed rate of 4.533%. The interest rate on the term note increases to 6.283% if the Company is not rated by at least one rating agency or if the Company’s credit rating is downgraded.

In 2011, the Company entered into a $100 million term note maturing August 5, 2021 bearing interest at a fixed rate of 5.54%. The interest rate on the term note increases to 7.29% if the notes are not rated by at least one rating agency, the credit rating on the notes is downgraded or if the Company’s credit rating is downgraded.

The line of credit and term notes require the Company to meet certain financial covenants, measured on a quarterly basis, including prescribed leverage, fixed charge coverage, minimum net worth, limitations on additional indebtedness and limitations on dividend payouts. At December 31, 2017, the Company was in compliance with such covenants.

We believe that if operating results remain consistent with historical levels and levels of other debt and liabilities remain consistent with amounts outstanding at December 31, 2017, the entire availability on the line of credit could be drawn without violating our debt covenants.

The Company’s fixed rate term notes contain a provision that allows for the noteholders to call the debt upon a change of control of the Company at an amount that includes a make whole premium based on rates in effect on the date of the change of control.

Deferred debt issuance costs and the discount on the outstanding term notes are both presented as reductions of term notes in the accompanying consolidated balance sheets at December 31, 2017 and December 31, 2016. Amortization expense related to these deferred debt issuance costs, which exclude costs related to the Bridge Facilities, was $3.0 million, $1.7 million and $1.2 million for the periods ended December 31, 2017, 2016 and 2015, respectively, and is included in interest expense in the consolidated statements of operations.