8-KMaterial AgreementsFinancial EventsSecurities & Listing+4

DIGITAL REALTY TRUST, INC. 8-K Report, Material Agreement (Aug 9, 2017)

Filed August 9, 2017For Securities:DLRDLR-PJDLR-PKDLR-PL

Summary

Digital Realty Trust, Inc. (DLR) and its operating partnership, Digital Realty Trust, L.P., announced significant financing activities on August 7, 2017. The company completed a substantial public offering, raising $1.35 billion through the issuance of senior unsecured notes, comprising $350 million of 2.750% Notes due 2023 and $1 billion of 3.700% Notes due 2027. These notes are guaranteed by the parent company, Digital Realty Trust, Inc. In addition to the debt financing, Digital Realty also issued 8,000,000 shares of its 5.250% Series J Cumulative Redeemable Preferred Stock, raising approximately $193.2 million in net proceeds. These preferred shares rank senior to common stock regarding dividends and liquidation preferences. The proceeds from these offerings will likely be used for general corporate purposes, including potentially funding future acquisitions or capital expenditures, and strengthening the company's financial position.

Key Highlights

  • 1Digital Realty Trust, L.P. issued $1.35 billion in senior unsecured notes: $350 million of 2.750% Notes due 2023 and $1 billion of 3.700% Notes due 2027.
  • 2The notes are fully and unconditionally guaranteed by the parent company, Digital Realty Trust, Inc.
  • 3Digital Realty Trust, Inc. completed an offering of 8,000,000 shares of 5.250% Series J Cumulative Redeemable Preferred Stock.
  • 4Net proceeds from the preferred stock offering were approximately $193.2 million.
  • 5The Series J Preferred Stock has a liquidation preference of $25.00 per share and ranks senior to common stock.
  • 6The company entered into an underwriting agreement for both the bond and preferred stock offerings with several major financial institutions.
  • 7The filing details specific redemption terms and events of default for the newly issued notes.

Frequently Asked Questions

Digital Realty Trust, L.P. raised $1.35 billion through the issuance of new notes, and Digital Realty Trust, Inc. raised approximately $193.2 million in net proceeds from the preferred stock offering. The total capital raised from these two transactions is approximately $1.5432 billion.

The Series J Preferred Stock has a dividend rate of 5.250% per annum, payable quarterly, and a liquidation preference of $25.00 per share. It ranks senior to the company's common stock. Redemption is generally not permitted before August 7, 2022, unless for specific reasons like maintaining REIT status or upon a Change of Control. Holders have conversion rights into common stock under specific Change of Control scenarios.

The notes include a provision for a special mandatory redemption at 101% of the principal amount plus accrued interest if the merger agreement with DFT is terminated or if the merger is not consummated by December 15, 2017. This indicates that the financing was potentially structured with the DFT merger in mind, and failure to complete the merger by the specified date carries a penalty for the bondholders.

No, the new notes are designated as general unsecured senior obligations of Digital Realty Trust, L.P. They rank equally with other unsecured senior indebtedness but are effectively subordinated to any secured indebtedness and liabilities of subsidiaries.