Item 1.01. Entry into a Material Definitive Agreement.
Amendment to Credit Agreements with Bank of America, N.A. and Bank of Montreal
On July 21, 2016, Franklin Street Properties Corp. (the “Company”) entered into a First Amendment (the “BAML First Amendment”) to the Second Amended and Restated Credit Agreement, dated October 29, 2014, among the Company, Bank of America, N.A, as administrative agent, L/C Issuer and Swing Line Lender, and the other lending institutions party thereto (“BAML Credit Agreement”), to provide for the extension of the term loan (the “BAML Term Loan”) maturity date from September 27, 2017 to September 27, 2021 (the “Extended Period”), the modification of certain financial covenants, including specified leverage ratios, and changes to the definitions of EBITDA, Net Operating Income and certain other measures. On July 21, 2016, the Company also entered into a First Amendment (the “BMO First Amendment” and, together with the BAML First Amendment, the “Credit Agreement Amendments”) to the Amended and Restated Credit Agreement, dated October 29, 2014, among the Company, Bank of Montreal, as administrative agent and lender, and the other lending institutions party thereto (“BMO Credit Agreement”), to conform the financial covenants to the BAML First Amendment.
Certain of the lenders party to the Credit Agreement Amendments, and their respective affiliates, have performed, and may in the future perform for the Company and its subsidiaries, various commercial banking, investment banking, underwriting and other financial advisory services, for which they have received, and will receive, customary fees and expenses.
The Credit Agreement Amendments are attached to this Current Report on Form 8-K as Exhibits 10.1 and 10.2 and are incorporated herein by reference. The foregoing summaries of the Credit Agreement Amendments are qualified in their entirety by the complete text of the Credit Agreement Amendments.
Interest Rate Swap Transactions
In connection with entering into the BAML First Amendment, on July 22, 2016, the Company executed trades in an aggregate notional amount of $400,000,000 with various financial institutions (the “Swap Counterparties”), pursuant to ISDA Master Agreements and Schedules thereto with each of the Swap Counterparties (the “Swap Transactions”). The Company entered into the Swap Transactions, which have an effective date of September 27, 2017, in order to fix the base LIBOR interest rate on the BAML Term Loan during the Extended Period at 1.12%. Accordingly, based upon the Company’s credit rating as of June 30, 2016, the interest rate on the BAML Term Loan when the Extended Period commences on September 27, 2017 will be 2.57%.
Certain of the Swap Counterparties, and their respective affiliates, have performed, and may in the future perform for the Company and its subsidiaries, various commercial banking, investment banking, underwriting and other financial advisory services, for which they have received, and will receive, customary fees and expenses.
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