Item 2.03
Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
On July 26, 2016, Retail Opportunity Investments
Corp. (the “
Company
”), as the guarantor, and Retail Opportunity Investments Partnership, LP (the “
Operating
Partnership
”), the operating partnership subsidiary of the Company, as the borrower, entered into a Note Purchase Agreement
by and among the Company, the Operating Partnership and the purchasers named therein (the “
Note Purchase Agreement
”).
The Note Purchase Agreement provides for the
issuance by the Operating Partnership of $200.0 million of senior notes in a private placement. Pursuant to the terms of the Note
Purchase Agreement, on or prior to September 8, 2016, the Operating Partnership will issue 3.95% Senior Notes due September 8,
2026 in an aggregate principal amount of $200.0 million (the “
Notes
”).
The Note Purchase Agreement contains terms,
conditions, covenants, and representations and warranties that are customary and typical for a transaction of this nature. The
Note Purchase Agreement contains various affirmative and negative covenants, including limitations on liens, investments, indebtedness,
fundamental organizational changes, dispositions, changes in the nature of business, transactions with affiliates, burdensome agreements,
use of proceeds and stock repurchases.
The Note Purchase Agreement also requires the
Company to comply with the following financial covenants: (i) minimum consolidated tangible net worth at least equal to the sum
of $850 million plus 80% of the net proceeds of future equity sales and issuances by the Company, (ii) minimum consolidated fixed
charge coverage ratio of at least 1.50 to 1.00, (iii) maximum consolidated leverage ratio of 60% (though the Company may make a
one-time election to permit such ratio to be as high as 65% for a period of up to two consecutive fiscal quarters following a Material
Acquisition (as defined in the Note Purchase Agreement), (iv) maximum quarterly distributions for any consecutive four quarters
not to exceed 95% of the Company’s funds from operations for such four quarter period, (v) maximum consolidated unencumbered
leverage ratio of 60% (though the Company may make a one-time election to permit such ratio to be as high as 65% for a period of
up to two consecutive fiscal quarters following a Material Acquisition (as defined in the Note Purchase Agreement), (vi) maximum
consolidated secured indebtedness ratio of 40%, (vii) maximum consolidated unencumbered interest coverage ratio of 1.75 to 1.00
and (viii) maximum consolidated secured recourse indebtedness ratio of 10%.
The Note Purchase Agreement also includes customary
events of default, in certain cases subject to reasonable and customary periods to cure, including, but not limited to, with respect
to non-payment, breach of terms, covenants or agreements, breach of representations and warranties, cross-defaults, insolvency
proceedings, inability to pay debts, attachment, judgments, ERISA events or if any guaranty under the Note Purchase Agreement shall
cease to be in full force and effect. The occurrence of an event of default may result in acceleration of payments including the
make whole premium described below and the holders of the Notes being permitted to exercise all other rights and remedies available
to them.
The Operating Partnership’s performance
of the obligations under the Note Purchase Agreement, including the payment of any outstanding indebtedness thereunder, are guaranteed,
jointly and severally, by the Company.
The Notes pay interest on March 8 and September
8 of each year, commencing on the first such date following issuance, at a rate of 3.95% per annum, and mature on September 8,
2026, unless prepaid earlier by the Operating Partnership. The Operating Partnership may prepay the Notes, in whole or in part,
at any time at a price equal to the outstanding principal amount of such Notes plus a make-whole premium (determined as the amount,
if any, of the discounted value of the remaining scheduled payments with respect to the called principal of such Notes that exceeds
such called principal, but in no event will such make-whole premium be less than zero). In addition, the Company is required to
offer to prepay the Notes at par upon a change in control.
The
foregoing description of the Note Purchase Agreement is only a summary and is qualified in its entirety by reference to the full
text of the Note Purchase Agreement, which is filed as Exhibit 4.1 to this Current Report on Form 8-K and is incorporated herein
by reference.