Item 2.03. Creation of a Direct Financial Obligation or an Obligation Under an Off-Balance Sheet Arrangement of a Registrant
On March 29, 2018, Piedmont Operating Partnership, LP (“Piedmont OP”), a consolidated subsidiary of Piedmont Office Realty Trust, Inc. (the “Registrant”), entered into a $250 million unsecured term loan facility (the “$250 Million Unsecured Term Loan Facility”) with U.S. Bank National Association ("U.S. Bank"), PNC Capital Markets LLC ("PNC"), and SunTrust Robinson Humphrey, Inc. ("SunTrust") serving as joint lead arrangers and joint book runners, U.S. Bank serving as administrative agent, and PNC and SunTrust serving as syndication agents. The Registrant used the loan proceeds to pay down its line of credit, and thereby extended its debt maturity profile.
The term of the $250 Million Unsecured Term Loan Facility is seven years with a maturity date of March 31, 2025; however, Piedmont OP may prepay the loan without penalty beginning after March 29, 2020. Piedmont OP paid customary arrangement and upfront fees to the lenders in connection with the closing of the $250 Million Unsecured Term Loan Facility.
The $250 Million Unsecured Term Loan Facility has the option to bear interest at varying levels based on either: (i) the London Interbank Offered Rate (“LIBOR”) for an interest period selected by Piedmont OP of one, two, three, or six months, or to the extent available from all lenders in each case, one year or periods of less than one month, or (ii) Base Rate, defined as the greater of the prime rate, the federal funds rate plus 0.5%, or LIBOR for a one-month period plus 1%; plus a a stated interest rate spread based on the higher credit rating level issued for either the Registrant or Piedmont OP. The stated interest rate spread over LIBOR can vary from 1.45% to 2.40% based upon the then current credit rating of the Registrant or Piedmont OP, whichever is higher. As of the closing of the $250 Million Unsecured Term Loan, the current stated interest rate spread on the loan was 1.60%.
In addition, on March 28, 2018, the Registrant entered into three interest rate swap agreements for a total notional amount of $150 million which effectively fixed $150 million of the $250 Million Unsecured Term Loan Facility at an interest rate of approximately 4.1%.
Under the terms of the $250 Million Unsecured Term Loan Facility, Piedmont OP is subject to certain financial covenants that require, among other things, the maintenance of an unencumbered interest coverage ratio of at least 1.75, an unencumbered leverage ratio of at least 1.60, a fixed charge coverage ratio of at least 1.50, a leverage ratio of no more than 0.60, and a secured debt ratio of no more than 0.40.
The foregoing does not purport to be a complete description of the terms of the $250 Million Unsecured Term Loan Facility and is qualified in its entirety by reference to the $250 Million Unsecured Term Loan Facility agreement, which is attached as Exhibit 10.1 hereto.