8-KMaterial AgreementsExhibits & Filings

Public Storage 8-K Report, Material Agreement (Jul 18, 2013)

Filed July 18, 2013For Securities:PSAPSA-PRPSA-PFPSA-PGPSA-PHPSA-PIPSA-PJPSA-PMPSA-PNPSA-POPSA-PPPSA-PQPSA-PSPSA-PKPSA-PL

Summary

Public Storage (PSA) announced on July 17, 2013, a significant amendment to its existing credit agreement. This Second Amendment modifies the terms of its $300 million revolving credit facility. The key change involves how the interest rate margin is determined, shifting from being based on senior debt credit ratings to a leverage-based pricing model tied to the ratio of Total Indebtedness to Gross Asset Value. This adjustment to the interest rate calculation is investor-focused as it directly impacts the cost of borrowing for Public Storage. The new margin structure, ranging from 0.900% to 1.500%, offers a more dynamic approach to managing debt costs based on the company's financial leverage, potentially leading to lower interest expenses if its asset base grows relative to its debt. The amendment also reiterates the Company's ability to request an additional $300 million increase to the facility, underscoring its financial flexibility.

Key Highlights

  • 1Public Storage amended its $300 million revolving credit facility on July 17, 2013.
  • 2The amendment revises the interest rate margin calculation for borrowings.
  • 3The new margin is now based on a leverage ratio (Total Indebtedness to Gross Asset Value) instead of senior debt credit ratings.
  • 4The applicable margin ranges from 0.900% to 1.500%.
  • 5The credit agreement allows for an optional increase of an additional $300 million, subject to certain conditions.
  • 6This change provides a direct link between the company's financial leverage and its borrowing costs.

Frequently Asked Questions

The primary purpose of the Second Amendment is to change how the interest rate margin on Public Storage's $300 million revolving credit facility is determined. It shifts from a model based on published senior debt credit ratings to a model based on the company's leverage ratio (Total Indebtedness to Gross Asset Value).

The new structure sets the applicable margin on borrowings between 0.900% and 1.500%. This margin will fluctuate quarterly based on Public Storage's ratio of Total Indebtedness to Gross Asset Value, as defined in the Credit Agreement.

The existing revolving credit facility has a capacity of $300 million. The amendment also retains the Company's ability to request an additional increase of up to $300 million, bringing the potential total capacity to $600 million, subject to meeting certain conditions.

If Public Storage effectively manages its leverage and its Gross Asset Value increases relative to its Total Indebtedness, it could benefit from the lower end of the new applicable margin range, thus reducing its interest expenses on borrowed funds.