8-KMaterial AgreementsFinancial Events

AVALONBAY COMMUNITIES INC 8-K Report, Material Agreement (Oct 4, 2011)

Filed October 4, 2011For Securities:AVB

Summary

AvalonBay Communities Inc. (AVB) reported on October 4, 2011, the execution of a new $750 million Third Amended and Restated Revolving Loan Agreement, effective September 29, 2011. This credit facility, with a four-year term and an option for a one-year extension, replaces a prior $1 billion facility. It offers significant flexibility, allowing for an increase of up to an additional $550 million, bringing the aggregate size to $1.3 billion, subject to lenders' voluntary commitments. The new facility provides AVB with substantial borrowing capacity and operational flexibility. Interest rates are tied to LIBOR and the company's credit rating, ranging from LIBOR plus 1.00% to 1.85%, with a current stated pricing of LIBOR plus 1.075% for drawn borrowings. A competitive bid option is also available for a portion of the facility, potentially offering more favorable rates. The agreement includes customary financial covenants aimed at maintaining the company's financial health.

Key Highlights

  • 1AvalonBay Communities, Inc. entered into a $750 million Third Amended and Restated Revolving Loan Agreement, effective September 29, 2011.
  • 2The new credit facility has a four-year term with a one-year extension option.
  • 3The facility allows for an increase of up to an additional $550 million, potentially reaching an aggregate size of $1.3 billion.
  • 4Interest rates are variable, based on LIBOR and AVB's credit rating, with current stated pricing at LIBOR plus 1.075%.
  • 5A competitive bid option is available for up to 65% of the facility, enabling potentially lower borrowing costs.
  • 6The new facility replaces AVB's prior $1 billion credit facility dated November 13, 2007.
  • 7Customary covenants, including leverage ratios and fixed charge coverage, are in place.

Frequently Asked Questions

The initial size of the Third Amended and Restated Revolving Loan Agreement is $750 million. The facility includes an option to increase by up to an additional $550 million, which would bring the total aggregate size to $1.3 billion, provided that lenders voluntarily agree to provide the additional commitment.

The credit facility has a term of four years, with the option to extend for an additional year under specific conditions and upon payment of an extension fee. Borrowings will bear interest at rates based on the London Interbank Offered Rate (LIBOR) plus a spread that varies from 1.00% to 1.85% depending on AvalonBay's credit rating. The current stated spread is 1.075% over LIBOR.

Yes, the company is subject to customary covenants, which include maintaining certain maximum leverage ratios, a minimum fixed charges coverage ratio, a maximum secured indebtedness ratio, and a minimum level of unencumbered assets. These covenants are designed to ensure the company's ongoing financial health and stability.

The new $750 million credit facility replaces AvalonBay's prior $1 billion credit facility dated November 13, 2007. While the new facility has a smaller initial size, it offers enhanced flexibility with the option to increase its size significantly and potentially better borrowing terms through the competitive bid option.