8-KMaterial AgreementsFinancial EventsRegulation FD+1

Extra Space Storage Inc. 8-K Report, Material Agreement (Dec 11, 2018)

Filed December 11, 2018For Securities:EXR

Summary

This 8-K filing announces Extra Space Storage Inc.'s (EXR) entry into an amended and restated credit agreement on December 7, 2018. The primary purpose of this filing is to update investors on the company's debt structure and financing capacity. The Operating Partnership, a subsidiary of EXR, entered into a new credit facility providing for aggregate borrowings of up to $1.35 billion, which can potentially be increased to $2.0 billion. This facility comprises a revolving credit facility and two term loan facilities, all of which are senior unsecured. This refinancing and expansion of credit facilities is a significant event for investors as it provides the company with substantial liquidity and flexibility for future growth, acquisitions, and operational needs. The agreement also includes covenants designed to maintain financial health and manage leverage, with specific ratios related to total indebtedness, secured debt, and EBITDA. The terms of the new credit agreement suggest a positive outlook on the company's ability to access capital markets and manage its debt effectively.

Key Highlights

  • 1Extra Space Storage LP (EXR's operating partnership) entered into an amended and restated credit agreement on December 7, 2018.
  • 2The new credit facility provides for aggregate borrowings of up to $1.35 billion, consisting of a $650 million revolving credit facility and two term loan facilities totaling $700 million.
  • 3The company has the option to increase the aggregate commitments under the credit facility up to $2.0 billion, providing significant financial flexibility.
  • 4The credit agreement is unsecured and guaranteed by the Company and certain subsidiaries.
  • 5The facility includes floating interest rates based on LIBOR or a base rate, with margins that vary based on the Company's Consolidated Leverage Ratio and potential improvements if the company achieves an investment grade rating.
  • 6Key financial covenants include maintaining specific ratios for total indebtedness to total asset value (not exceeding 60% or 65% after acquisitions), total secured debt to total asset value (not exceeding 40%), and adjusted EBITDA to fixed charges (at least 1.50x).
  • 7The company has $50 million drawn on the Tranche 1 Term Loan Facility as of December 7, 2018, with both term loans fully funded.

Frequently Asked Questions

The amended and restated credit agreement provides for aggregate borrowings of up to $1.35 billion. Additionally, the Operating Partnership has the option to increase the commitments under the credit facility up to an aggregate of $2.0 billion, subject to certain conditions.

The credit facility consists of three main components: a senior unsecured revolving credit facility of $650.0 million, a senior unsecured Tranche 1 term loan facility of up to $480.0 million, and a senior unsecured Tranche 2 term loan facility of up to $220.0 million.

Yes, the credit agreement includes several financial covenants that the company and its operating partnership must comply with. These include maintaining a ratio of total indebtedness to total asset value of not more than 60% (or 65% following a material acquisition), a ratio of total secured debt to total asset value of not more than 40%, and a ratio of adjusted EBITDA to fixed charges of at least 1.50 to 1.00.

The senior unsecured revolving credit facility is due January 31, 2023. The senior unsecured Tranche 1 term loan facility is due January 31, 2024, and the senior unsecured Tranche 2 term loan facility is due October 13, 2023.