8-KMaterial AgreementsFinancial EventsSecurities & Listing+2

DIGITAL REALTY TRUST, INC. 8-K Report, Material Agreement (Apr 22, 2009)

Filed April 22, 2009For Securities:DLRDLR-PJDLR-PKDLR-PL

Summary

Digital Realty Trust, Inc. (DLR) announced through its Operating Partnership, Digital Realty Trust, L.P., the issuance of $266.4 million in aggregate principal amount of 5.50% Exchangeable Senior Debentures due 2029. These debentures are unsecured senior obligations of the Operating Partnership, fully guaranteed by the Company, and were offered to qualified institutional buyers. The issuance represents a move to raise capital, with the debentures being exchangeable for DLR common stock at an initial exchange price of $43.00 per share, a premium to the market price at the time of pricing. This financing activity occurred during a period of economic uncertainty, and the debentures are structured with various provisions including redemption options for the company, repurchase rights for holders, and conditions that could trigger accelerated maturity or other default events. The company has also entered into a registration rights agreement, committing to file a shelf registration statement for the underlying shares by January 15, 2010, to facilitate future resales and avoid potential liquidated damages.

Key Highlights

  • 1Digital Realty Trust, L.P. issued $266.4 million in 5.50% Exchangeable Senior Debentures due 2029.
  • 2The debentures are general unsecured senior obligations of the Operating Partnership, guaranteed by Digital Realty Trust, Inc.
  • 3The issuance was a private placement to qualified institutional buyers, not registered under the Securities Act.
  • 4Debentures are exchangeable for DLR common stock at an initial rate of 23.2558 shares per $1,000 principal amount, implying an exchange price of $43.00 per share.
  • 5The initial exchange price represents an approximate 20.0% premium over DLR's common stock price on April 14, 2009.
  • 6The company agreed to file a shelf registration statement for the underlying shares by January 15, 2010, with provisions for liquidated damages if deadlines are missed.
  • 7The debentures include specific redemption and repurchase rights for both the issuer and holders, with defined 'designated events' and 'events of default'.

Frequently Asked Questions

The primary purpose of issuing these debentures is to raise capital for Digital Realty Trust, L.P. While the specific use of proceeds is not detailed in this filing, such issuances typically fund operations, acquisitions, development projects, or general corporate purposes.

The debentures are exchangeable for Digital Realty Trust, Inc. common stock at an initial rate of 23.2558 shares per $1,000 principal amount. This translates to an initial exchange price of $43.00 per share. This means that if the market price of DLR's common stock rises above $43.00 per share, holders of the debentures may find it beneficial to exchange their debentures for stock, potentially realizing a profit.

No, the debentures and the underlying shares of common stock have not been registered under the Securities Act of 1933. They were offered and sold to qualified institutional buyers in reliance on exemptions from registration, specifically Section 4(2) and Rule 144A of the Securities Act.

Key risks include the unsecured nature of the debentures (ranking equally with other unsecured debt), the potential for the company to redeem them after April 18, 2014, and the possibility of holders being required to repurchase them on specific dates. Additionally, 'events of default,' such as failure to pay interest or principal, or significant financial distress of the company or its subsidiaries, could lead to accelerated maturity. There are also registration default risks if the company fails to meet filing deadlines, leading to liquidated damages.