8-KMaterial AgreementsFinancial EventsExhibits & Filings

Extra Space Storage Inc. 8-K Report, Material Agreement (Jun 21, 2013)

Filed June 21, 2013For Securities:EXR

Summary

Extra Space Storage Inc. (EXR) announced on June 21, 2013, through its operating partnership, the issuance of $250.0 million in aggregate principal amount of 2.375% Exchangeable Senior Notes due 2033. The net proceeds to the company, after initial purchaser commissions and expenses, were approximately $244.7 million. These notes are general unsecured senior obligations of the Operating Partnership, fully and unconditionally guaranteed by the Company. This offering represents a significant financing event for EXR, providing capital with a relatively low interest rate and a long maturity. The key feature for investors is the exchangeability of these notes into the Company's Common Stock under specific conditions, effectively providing a potential upside participation in the company's stock performance at an initial exchange price representing a 30% premium over the stock price on June 17, 2013. The filing details various scenarios under which the notes can be exchanged, redeemed, or repurchased, as well as the conditions for fundamental changes and events of default, providing transparency on the debt's structure and potential impact on shareholder value.

Key Highlights

  • 1Issued $250 million in aggregate principal amount of 2.375% Exchangeable Senior Notes due 2033.
  • 2Net proceeds from the offering were approximately $244.7 million.
  • 3The Notes are unsecured senior obligations of the Operating Partnership, guaranteed by Extra Space Storage Inc.
  • 4Notes are exchangeable into EXR Common Stock under specific conditions, with an initial exchange price of approximately $55.69 per share (a 30% premium to the June 17, 2013 stock price).
  • 5The Company has agreed to file a shelf registration statement for the underlying shares by December 18, 2013, with penalties for delay.
  • 6The Notes mature on July 1, 2033.
  • 7Holders have the right to require repurchase on July 1, 2018, July 1, 2023, and July 1, 2028, or upon a fundamental change.

Frequently Asked Questions

The primary purpose of issuing these notes is to raise capital. The net proceeds of approximately $244.7 million will be used by Extra Space Storage LP, the operating partnership, to fund its operations or for general corporate purposes. This provides the company with a source of long-term financing at a relatively low interest rate.

The Notes can be exchanged for cash and/or shares of EXR Common Stock under several conditions. These include if the stock price exceeds a certain threshold (130% of the exchange price) for a specified period, if the trading price of the Notes falls below a certain percentage of the stock price value, upon redemption, upon specified corporate events, or at specific dates after April 1, 2018, and after April 1, 2033.

Risks include the fact that the Notes are unsecured and subordinate to any secured debt of the Operating Partnership. Additionally, while exchangeable, the value of the Notes is tied to the performance of EXR's stock, which can be volatile. There are also risks related to potential delays in registration of the underlying shares, which could lead to liquidated damages. Events of default, such as failure to make payments or breaches of covenants, could lead to accelerated maturity of the Notes.

If the Company fails to meet the deadlines for filing and making effective the shelf registration statement for the underlying shares, liquidated damages will accrue on the Notes. The rate is 0.50% per annum for the first 90 days of default and 1.00% per annum thereafter, payable semi-annually in arrears, until the default is cured.