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Item 1.01
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Entry into a Material Definitive Agreement
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On May 23, 2019, HCP, Inc., a Maryland corporation (the “Company”), entered into an Amended and Restated Credit Agreement (the “Amended Credit Agreement”), by and among the Company, as borrower, the lenders referred to therein, and Bank of America, N.A., as administrative agent. The Amended Credit Agreement provides for a $2.5 billion senior unsecured revolving credit facility (“Revolving Credit Facility”), replacing the Company’s prior $2.0 billion senior unsecured revolving credit facility. The Amended Credit Agreement also provides for a senior unsecured term loan facility of up to $250 million (“Term Loan Facility”), which may be drawn at the Company’s option (subject to customary borrowing conditions) during a delayed-draw availability period ending on the earlier of 90 days after the date of the Amended Credit Agreement and the second drawing under the Term Loan Facility.
Pursuant to the Amended Credit Agreement, the Company has the right to borrow additional term loans and/or increase the Revolving Credit Facility by up to $750 million in the aggregate, so long as no default or event of default is continuing and other customary conditions have been satisfied. Any such increase will be syndicated on a best efforts basis and no lender is required to increase its commitment under the Amended Credit Agreement to facilitate such increase. The Amended Credit Agreement includes sublimits of (i) up to $100 million for letters of credit, (ii) up to $1.0 billion for loans and other extensions of credit under the Revolving Credit Facility that are denominated in certain currencies other than U.S. dollars, and (iii) up to 50% of the Revolving Credit Facility for certain negotiated rate loans.
The Revolving Credit Facility matures on May 23, 2023. However, at its sole option, the Company may extend its maturity of the Revolving Credit Facility for up to two additional 6-month periods, so long as (i) no default or event of default exists at the time of the request or on the then current maturity date, (ii) the Company pays a fee equal to the product of 0.0625% multiplied by the then aggregate commitments under the Revolving Credit Facility, and (iii) other customary conditions have been satisfied. The Term Loan Facility matures on May 23, 2024.
Loans outstanding under the Revolving Credit Facility (other than negotiated rate loans) bear interest at an annual rate equal to the applicable margin plus the applicable base rate or, at the Company’s option, the LIBOR, CDOR or BBSY interest rate (“Eurocurrency rate”), as applicable. The applicable margin under the Revolving Credit Facility ranges from 0.00% to 0.45% for base rate loans and 0.75% to 1.45% for Eurocurrency rate loans, in each case based on the senior unsecured long-term debt ratings of the Company (“Debt Ratings”). The applicable margin will be reduced by 0.01% if the Company achieves specified annual sustainability thresholds, subject to certain conditions. In addition, the Company is obligated to pay a facility fee on the Revolving Credit Facility (regardless of usage) at a rate per annum ranging from 0.10% to 0.30% depending on the Company’s Debt Ratings. Based on the Company’s current Debt Ratings, the applicable margins for revolving loans are 0.825% for Eurocurrency rate loans or 0.00% for base rate loans, and the facility fee is 0.15%.
Loans outstanding under the Term Loan Facility will be denominated in U.S. dollars and bear interest at an annual rate equal to the applicable margin plus the applicable base rate or, at the Company’s option, the applicable Eurocurrency rate. The applicable margin under the Term Loan Facility ranges from 0.00% to 0.65% for base rate loans and 0.80% to 1.65% for Eurocurrency rate loans, in each case based on the Company’s Debt Ratings. Based on the Company’s current Debt Ratings, the applicable margins under the Term Loan Facility are 0.90% for Eurocurrency rate loans or 0.00% for base rate loans. In addition, the Company is also required to pay a ticking fee on any undrawn commitments under the Term Loan Facility at a rate per annum equal to 0.15% beginning 45 days following the date of the Amended Credit Agreement until the earlier of the Term Loan Facility being fully drawn and the end of the delayed-draw availability period. The Term Loan Facility was undrawn as of May 23, 2019.
The Amended Credit Agreement includes certain customary representations and warranties by the Company and imposes on the Company certain customary covenants and other requirements, including financial covenants and cross-default provisions to other indebtedness. Among other things, these covenants, using terms defined in the agreements: (i) limit the ratio of Enterprise Total Indebtedness to Enterprise Gross Asset Value to 60%; (ii) limit the ratio of Enterprise Secured Debt to Enterprise Gross Asset Value to 40%; (iii) limit the ratio of Enterprise Unsecured Debt to Enterprise Unencumbered Asset Value to 60%; (iv) require a minimum Fixed Charge Coverage Ratio of 1.5 times; and (v) require a minimum Consolidated Tangible Net Worth of $7.0 billion, in each case, tested on a quarterly basis.
The representations, warranties and covenants contained in the Amended Credit Agreement were made only for purposes of the Amended Credit Agreement and as of the specific date (or dates) set forth therein, and were solely for the
benefit of the parties to the Amended Credit Agreement and may be subject to certain limitations as agreed upon by the contracting parties. In addition, the representations, warranties and covenants contained in the Amended Credit Agreement may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. Investors are not third-party beneficiaries of the Amended Credit Agreement and should not rely on the representations, warranties and covenants contained therein, or any descriptions thereof, as characterizations of the actual state of facts or conditions of the Company. Moreover, information concerning the subject matter of the representations and warranties contained in the Amended Credit Agreement may change after the date (or dates) of the Amended Credit Agreement, which subsequent developments may not be fully reflected in the Company’s public disclosure.
The Company’s obligations under the Amended Credit Agreement rank
pari passu
with other unsecured, unsubordinated general obligations of the Company.
Certain of the lenders party to the Amended Credit Agreement and their respective affiliates engage in financial advisory, investment banking, commercial banking or other transactions of a financial nature with the Company and its subsidiaries, including the provision of advisory services for which they receive certain fees, expense reimbursement or other payments.
The foregoing description of the Amended Credit Agreement does not purport to be complete and is qualified in its entirety by the full text of the Amended Credit Agreement, which is filed hereto as Exhibit 10.1 to this Current Report on Form 8-K and incorporated herein by reference.