8-KMaterial AgreementsFinancial EventsExhibits & Filings

EQUITY RESIDENTIAL 8-K Report, Material Agreement (Oct 11, 2007)

Filed October 11, 2007For Securities:EQR

Summary

This Form 8-K filing by Equity Residential (EQR) on October 11, 2007, primarily concerns a material definitive agreement related to a new $500 million senior unsecured term loan facility entered into by its operating partnership, ERP Operating Limited Partnership (the "Operating Partnership"). The funds raised from this facility, expected to be fully drawn by October 13, 2007, are intended to reduce the outstanding balance on the Operating Partnership's existing $1.5 billion revolving credit facility and for general corporate purposes. This move indicates a strategic debt management approach by EQR to optimize its capital structure. Investors should note the terms of this new facility, including its maturity date of October 5, 2010, with potential one-year extensions. The interest rate is tied to LIBOR plus a spread that varies with EQR's credit rating, starting at 42.5 basis points. The Operating Partnership has the flexibility to increase the loan amount up to $750 million and can prepay the principal without penalty, offering significant financial flexibility. The covenants governing this new loan are consistent with those of its existing revolving credit facility.

Key Highlights

  • 1ERP Operating Limited Partnership (EQR's operating arm) secured a new $500 million senior unsecured term loan facility.
  • 2The loan proceeds will be used to pay down the existing $1.5 billion revolving credit facility and for general corporate purposes.
  • 3The facility is scheduled to be fully funded by October 13, 2007.
  • 4The loan matures on October 5, 2010, with two one-year extension options available to the Operating Partnership.
  • 5Interest rate is based on LIBOR plus a spread of 42.5 basis points, which is subject to change based on EQR's credit rating.
  • 6The Operating Partnership has the option to increase the facility size up to $750 million.
  • 7Principal can be prepaid without penalty, offering financial flexibility.

Frequently Asked Questions

The primary purpose of the new $500 million term loan facility is to pay down a portion of the outstanding balance on ERP Operating Limited Partnership's existing $1.5 billion long-term revolving credit facility and to fund general corporate purposes.

The new loan facility matures on October 5, 2010, with the option for two one-year extensions. The interest rate is structured as LIBOR plus a spread, which currently stands at 42.5 basis points and is dependent on the credit rating of the Operating Partnership's long-term senior unsecured debt.

Yes, Equity Residential, through its Operating Partnership, has significant flexibility. They can increase the loan amount to a total of $750 million if lenders agree, and they can prepay the principal in whole or in part at any time without penalty, aside from certain fees related to Eurodollar loans.

Equity Residential, as the sole general partner of ERP Operating Limited Partnership, and Lexford Properties, L.P., a subsidiary of the Operating Partnership, are guarantors of the Operating Partnership's obligations under this new loan facility.