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AVALONBAY COMMUNITIES INC 8-K Report, Material Agreement (Feb 28, 2017)

Filed February 28, 2017For Securities:AVB

Summary

AvalonBay Communities, Inc. (AVB) announced on February 28, 2017, the entry into a $250 million variable rate unsecured term loan facility with PNC Bank, National Association, as Administrative Agent. This facility includes an accordion feature that allows for an additional $250 million, potentially bringing the total to $500 million, subject to lender commitments. The loan aims to provide flexible financing for the company's operations and growth initiatives. The term loan has staggered maturity dates, with $100 million due in five years and $150 million due in seven years from the closing date. Interest rates will be variable, based on either LIBOR or a defined Base Rate, with initial spreads of 0.90% and 1.50% over 1-month LIBOR for the respective maturities. The agreement includes customary covenants such as leverage ratios and coverage requirements, which are standard for maintaining financial health and operational flexibility in the real estate investment trust sector. The company has the option for delayed funding until April 29, 2017.

Key Highlights

  • 1Entry into a $250 million variable rate unsecured term loan facility.
  • 2Option to increase the facility by an additional $250 million to a total of $500 million.
  • 3Staggered maturity dates for the loan tranches: $100 million in 5 years and $150 million in 7 years.
  • 4Interest rates are variable, tied to LIBOR or a Base Rate, with initial spreads of 0.90% and 1.50% over 1-month LIBOR.
  • 5Loan includes a delayed draw feature, allowing funding up to April 29, 2017.
  • 6Subject to customary covenants, including maximum leverage ratios and minimum fixed charges coverage.
  • 7The loan is unsecured, which can be advantageous for maintaining balance sheet flexibility.

Frequently Asked Questions

The primary purpose of the new term loan is to provide AvalonBay Communities, Inc. with flexible, unsecured financing. While not explicitly stated, such facilities are typically used to support ongoing operations, fund development projects, acquisitions, or for general corporate purposes, enhancing the company's financial flexibility.

The term loan includes customary covenants designed to protect lenders and ensure the borrower's financial health. These include maintaining maximum leverage ratios, a minimum fixed charges coverage ratio, a maximum secured indebtedness ratio, and a minimum unencumbered assets level.

The interest rate is variable. It will be based on either the London Interbank Offered Rate (LIBOR) or a defined Base Rate. The specific spread over LIBOR will vary based on the company's credit rating, with initial spreads set at 0.90% for the 5-year maturity tranche and 1.50% for the 7-year maturity tranche.

Yes, the term loan includes an accordion feature that allows the company to request an additional $250 million, bringing the total potential borrowing to $500 million. However, the availability of this additional amount is subject to the discretion and commitment of the lenders in the syndicate.