Glimcher Realty Trust (NYSE: GRT) announced some key breakthroughs in its efforts to address its liquidity position.
Glimcher has received a term sheet from its lead arrangers, KeyBanc Capital Markets Inc. and Banc of American Securities, for the modification and extension of its current $470 million unsecured credit facility. Glimcher launched the syndication process for the facility in early July and has now received all necessary commitments from the lenders. The term sheet will add an additional one year extension option which would take the maturity through December of 2011. The initial facility stays at $470 million but includes periodic reductions in commitment amounts throughout the term. The modified facility would also be secured with a first mortgage on all current and future unencumbered assets.
The term sheet modifies several of the key covenants of the facility. The minimum fixed charges covenant is modified from 1.50 to 1.35, with a further reduction to 1.30 if Glimcher completes $150 million in asset sales and permanently reduces capacity under the facility to $350 million. The amendment increases the maximum recourse debt limitation from 20 percent of the firm's total asset value to 27.5 percent, assuming the property cap rate is increased from 7.5 percent to 8.5 percent. The facility amendment also increases the maximum leverage covenant from 65 percent to 72.5 percent, assuming the same 8.5 percent cap rate.
The term sheet also requires that proceeds generated from operating cash flow or capital events be used to reduce outstanding borrowings under the facility and limits distributions on our common shares to the greater of $0.40 per common share annually or the minimum amount required to maintain REIT status. Pricing on the modified credit facility will increase to LIBOR plus 4.0 percent with a LIBOR floor of 1.5 percent.
Glimcher also entered into an agreement for the sale of its Lloyd Center regional mall in Portland, Ore. to Merlone Geier Partners IX, L.P. Merlone will pay $192 million, which will include assumption of the $127.5 million mortgage on the property. The transaction is expected to generate net proceeds of approximately $60 million that will be used for general corporate purposes, which may include reducing amounts under its credit facility.
"We are pleased with the recent progress made in addressing our current liquidity situation" Glimcher Chairman and CEO Michael P. Glimcher said in a statement. "We have now received commitments from all necessary lenders on the modification of our credit facility which will give us additional term through the end of 2011 and enhanced flexibility with respect to the key covenants in the facility."
Glimcher also commenced an offering of approximately $80 million of its common shares. The company expects to grant the underwriters an overallotment option to purchase up to 15 percent of additional common shares. Like with the Lloyd Center sale, the proceeds from the offering will be used for general purposes, including potentially paying down its credit facility. Goldman, Sachs & Co. is serving as sole bookrunning manager for the offering and KeyBanc Capital Markets Inc. will act as joint-lead.