Item 1.01 Entry into a Material Definitive Agreement.
The information set forth under Item 2.03 below relating to the Trust Deed and ITM, each as defined below, is incorporated by reference into this Item 1.01.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
Transaction Overview
On
Principal Principal Amount on Amount on Closing Date Class Closing Date (USD)* Noteholder Class A GBP Asset Backed Floating Rate Notes ("Class A GBP Notes") £ 519,632,744$ 644,396,565 Barclays Class A EUR Asset Backed Floating Rate Notes ("Class A EUR Notes") € 122,493,843$ 137,609,583 Barclays Subtotal$ 782,006,149 Class B GBP Asset Backed Floating Rate Notes ("Class B GBP Notes") £ 174,149,194$ 215,962,416 ACREFI B Class B EUR Asset Backed Floating Rate Notes ("Class B EUR Notes") € 83,720,558$ 94,051,675 ACREFI B Subtotal$ 310,014,091 Total$ 1,092,020,239
* Assuming conversion to
Although the Initial Notes have a stated maturity of
The Initial Notes represent secured, limited recourse obligations of the Issuer
payable solely from the Underlying Loans acquired by the Issuer from ACREFI B
under a Global Master Repurchase Agreement (the "New Financing Arrangements")
which have been pledged pursuant to a deed of charge (the "Deed of Charge"). In
addition, ACREFI B transferred two additional commercial mortgage loans to the
Issuer with outstanding principal balances in aggregate of £26.0 million and
€5.3 million (or
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The New Financing Arrangements do not contain any mark-to-market or daily margining provisions. The New Financing Arrangements include provisions which may require ACREFI B to partially prepay individual secured debt arrangements underlying the New Financing Arrangements in certain circumstances. These include (i) where a material default (including insolvency, maturity default, financial covenant breach or payment default, subject to the Servicer's ability to waive such defaults in accordance with the servicing and realisation agreement, as described below) occurs in relation to the relevant Underlying Loan, to the extent that following such default, the market value of the relevant Underlying Loan is less than a specified threshold and (ii) where certain loan-to-value financial covenants ("LTV Covenants") for a secured debt arrangement are not satisfied. The LTV Covenants are not applicable during the initial six months following the Closing Date.
In connection with the New Financing Arrangements, the Company, through its
subsidiaries, repaid €16.5 million (or
The Issuer may issue, from time to time, additional Class A GBP Notes and
Class A EUR Notes (together with the Class A Initial Notes, the "Class A Notes")
to Barclays and additional Class B GBP Notes and Class B EUR Notes (together
with the Class B Initial Notes, the "Class
The proceeds of any issuances of additional Notes, or Class A USD Notes or Class B USD Notes, will be used to purchase additional assets, as agreed between the Company and the holders, from time to time, of the Class A Notes, pursuant to the New Financing Arrangements in respect of the Notes and pursuant to a newly agreed Global Master Repurchase Agreement in respect of any Class A USD Notes or Class B USD Notes.
The Company continues to provide a guarantee of the obligations of ACREFI B under the New Financing Arrangements (the "Guaranty"). Under the terms of the Guaranty, the Company is subject to customary covenants, including financial covenants with respect to minimum tangible net worth, maximum ratio of total indebtedness to consolidated tangible net worth, and minimum liquidity.
The offer and sale of the Initial Notes has not been registered under the
Servicing and Realisation
The Underlying Loans sold or to be sold to the Issuer and the Additional Collateral will be serviced by Servicer pursuant to a servicing and realisation agreement, pursuant to which the Servicer will service the loans and Barclays will serve as the realisation agent. The Servicer has additional discretion to waive certain underlying covenant defaults or debt service payments under the Underlying Loans for a period of 18 months following the Closing Date.
The Notes
Collateral
The Initial Notes are secured by, among other things, (i) the portfolio of the Underlying Loans sold or to be sold to the Issuer under the New Financing Arrangements, excluding any collateral which is repurchased by ACREFI B pursuant to the New Financing Arrangements, and the Additional Collateral, (ii) certain transaction, income, margin and any additional accounts and all monies now or in the future standing to the credit of or accrued or accruing on any of the foregoing accounts, (iii) certain permitted investments by the Trustee as set forth in the Trust Deed, (iv) any asset, agreement, property or right of the Issuer under each transaction document (as set forth in the Deed of Charge), (v) all of the Issuer's property, assets, rights and revenues, whatsoever and wheresoever present and future, and (vi) all proceeds of the foregoing.
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The portfolio of Underlying Loans has an estimated weighted average life of 47 months. The estimated weighted average life of the Underlying Loans has been calculated assuming certain collateral characteristics, including that there are no prepayments, defaults or delinquencies on the Underlying Loans and certain other modeling assumptions. In addition, it is assumed that each Underlying Loan is fully extended to its maximum contracted extension term. There can be no assurances that such assumptions will be met.
The Initial Notes constitute secured, limited recourse obligations of the Issuer. The Notes of each class will at all times rank without preference or priority pari passu amongst themselves.
Interest
The Class A Initial Notes have a weighted average interest rate margin of approximately 1.73% over LIBOR or EURIBOR, as applicable. Any surplus interest payments on the Underlying Loans will be paid to ACREFI B, as holder of residual certificates issued under the Trust Deed (the "Residual Certificates"). On each designated quarterly interest payment date, and upon specified reductions in the purchase price of Underlying Loans in accordance with the New Financing Arrangements, interest on each class of Initial Notes will be payable in the applicable currency in arrears.
Subordination of the Notes
Payments of interest on the Class A Notes will at all times rank in priority to
payments of interest on the Class
Event of Default
The Notes are subject to customary events of default, including non-payment of principal or interest on the Class A Notes, breach of obligations of the Issuer under the Trust Deed, Deed of Charge or other transaction documents, an insolvency event in relation to the Issuer, or if it is or becomes unlawful for the Issuer to perform or comply with its obligations under the Notes or transaction documents, as well as the occurrence of customary events of default relating to the performance of ACREFI B under the New Financing Arrangements and of the Company under the Guaranty. Upon delivery of an enforcement notice relating to an event of default, the Notes will become immediately due and payable at their principal amount outstanding, together with accrued interest, and all entitlements of holders of Residual Certificates to any residual payments will be suspended until the Notes have been paid in full.
The foregoing summaries of the Trust Deed and the ITM are qualified in their entirety by reference to the full text of the Trust Deed and ITM, copies of which are filed herewith as Exhibits 10.1 and 10.2, respectively, and incorporated herein by reference.
Forward-Looking Information
The Company makes forward-looking statements herein within the meaning of
Section 27A of the Securities Act and Section 21E of the
The forward-looking statements are based on our beliefs, assumptions and
expectations, taking into account all information currently available to the
Company. Forward-looking statements are not predictions of future events. These
beliefs, assumptions and expectations can change as a result of many possible
events or factors, not all of which are known to the Company. See "Item 1A. Risk
Factors" in the Company's Annual Report on Form 10-K for the year ended
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Item 9.01 Financial Statements and Exhibits
(d) Exhibits. Exhibit No. Description 10.1 Trust Deed, datedJune 30, 2020 , by and between ACRE Debt 2 PLC, as issuer (the "Issuer") andU.S. Bank Trustees Limited , as trustee (the "Trustee") 10.2* Incorporated Terms Memorandum, datedJune 30, 2020 , by and among the Issuer,ACREFI B, LLC ,ACREFI BN, LLC , the Trustee, Barclays Bank plc, and the other parties identified therein 104 Cover Page Interactive Data File (embedded within the Inline XBRL document)
* Portions of this exhibit have been omitted pursuant to Rule 601(b)(10) of
Regulation S-K
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