Item 1.01 Entry into a Material Definitive Agreement.
On October 7, 2020, QualityTech, LP (the "Operating Partnership"), the operating
partnership of QTS Realty Trust, Inc. (the "Company"), and QTS Finance
Corporation, a subsidiary of the Operating Partnership initially formed for the
purpose of facilitating an offering of senior notes in 2014 (the "Co-Issuer"
and, together with the Operating Partnership, the "Issuers"), closed an offering
of $500 million aggregate principal amount of 3.875% senior notes due 2028 (the
"Notes"). The offering was conducted pursuant to Rule 144A and Regulation S
under the Securities Act of 1933, as amended (the "Securities Act"), and the
Notes have not been registered under the Securities Act or applicable state
securities laws and may not be offered or sold in the United States absent
registration or an applicable exemption from the registration requirements of
the Securities Act and applicable state securities laws.
On October 7, 2020, in connection with the offering, the Company, the Issuers
and certain of their subsidiaries entered into an indenture (the "Indenture")
with Deutsche Bank Trust Company Americas, as trustee ("Trustee"), pursuant to
which the Issuers issued the Notes at a price equal to 100% of their face value.
Pursuant to the Indenture, the Notes have the following terms, among others:
Interest - Interest on the Notes will accrue from October 7, 2020, at a rate of
3.875% per annum and be payable semi-annually in arrears in cash on April 1 and
October 1 of each year, beginning April 1, 2021.
Maturity - The Notes will mature on October 1, 2028.
Guarantees - The Notes are fully and unconditionally guaranteed on a senior
unsecured basis only by the Operating Partnership's subsidiaries (other than the
Co-Issuer) that currently guarantee the Operating Partnership's borrowings under
its unsecured senior credit facility (the "unsecured credit facility"). In
addition, in the future, any Restricted Subsidiary (as defined below) of the
Operating Partnership (other than a foreign subsidiary or a receivables entity)
that guarantees any indebtedness of the Company, the Issuers or any subsidiary
guarantor of the Notes and is not already a guarantor of the Notes will be
required to guarantee the Notes. The Company will not initially guarantee the
Notes and will not be required to guarantee the Notes except under certain
circumstances.
Ranking - The Notes will be (i) the senior unsecured obligations of the Issuers,
(ii) pari passu in right of payment with all other existing and future unsecured
senior indebtedness and unsecured senior guarantees of the Issuers, including
the Operating Partnership's indebtedness under the unsecured credit facility,
(iii) senior in right of payment to any future subordinated indebtedness and
subordinated guarantees of the Issuers, if any, (iv) effectively subordinated in
right of payment to all existing and future secured indebtedness and secured
guarantees of the Issuers, to the extent of the value of the collateral securing
such indebtedness and guarantees, (v) structurally subordinated in the right of
payment to all existing and future indebtedness, guarantees and other
liabilities, including trade payables, and claims of holders of preferred stock,
if any, of the Operating Partnership's subsidiaries (other than the Co-Issuer)
that are not guarantors of the Notes (the "non-guarantor subsidiaries"), and
(vi) unconditionally guaranteed by the guarantors on a senior unsecured basis.
Each guarantee of the Notes by a guarantor will be (i) a senior unsecured
obligation of such guarantor, (ii) pari passu in right of payment with all
existing and future unsecured senior indebtedness and unsecured senior
guarantees of such guarantor, including, if applicable, such guarantor's
guarantee of the Operating Partnership's obligations under the unsecured credit
facility, (iii) senior in right of payment to any future subordinated
indebtedness and subordinated guarantees of such guarantor, if any, (iv)
effectively subordinated in right of payment to all existing and future secured
indebtedness and secured guarantees of such guarantor, to the extent of the
value of the collateral securing such indebtedness and guarantees, and (v)
structurally subordinated to all existing and future indebtedness, guarantees
and other liabilities, including trade payables, and claims of holders of
preferred stock, if any, of the non-guarantor subsidiaries.
Optional Redemption - At any time prior to October 1, 2023, the Issuers may
redeem the Notes, in whole or in part, at any time at a redemption price equal
to (i) 100% of the principal amount, plus (ii) accrued and unpaid interest to,
but excluding, the redemption date, and (iii) a make-whole premium. On or after
October 1, 2023, the Issuers may redeem the Notes, in whole or in part, at a
redemption price equal to (i) 101.938% of the principal amount from October 1,
2023 to September 30, 2024, (ii) 100.969% of the principal amount from October
1, 2024 to September 30, 2025, and (iii) 100.000% of the principal amount of the
Notes from October 1, 2025 and thereafter, in each case plus accrued and unpaid
interest to, but excluding, the redemption date. In addition, at any time prior
to October 1, 2023, the Issuers may, subject to certain conditions, redeem up to
40% of the aggregate principal amount of the Notes at 103.875% of the principal
amount thereof, plus accrued and unpaid interest to, but excluding, the
redemption date, with the net cash proceeds of certain equity offerings
consummated by the Company or the Operating Partnership.
Repurchase Obligations - If a Change of Control Triggering Event (as defined in
the Indenture) occurs, holders of the Notes may require the Issuers to
repurchase all or part of their Notes at a price of 101% of the principal amount
thereof, plus accrued and unpaid interest to, but excluding, the repurchase
date. In addition, in certain circumstances the Issuers may be required to use
the net proceeds of asset sales to purchase a portion of the Notes at 100% of
the principal amount thereof, plus accrued and unpaid interest to, but
excluding, the repurchase date.
Covenants - The Indenture contains covenants that, among other things, limit the
Operating Partnership's ability and the ability of certain of its subsidiaries
(its "Restricted Subsidiaries") (i) to incur secured or unsecured indebtedness,
(ii) to pay dividends or distributions on its equity interests, or redeem or
repurchase equity interests, (iii) to make certain investments or other
restricted payments, (iv) to enter into transactions with affiliates, (v) to
enter into agreements limiting the ability of the Operating Partnership's
Restricted Subsidiaries to pay dividends or make certain transfers and other
payments to the Operating Partnership or to other Restricted Subsidiaries, (vi)
to sell assets and (vii) to merge, consolidate or transfer all or substantially
all of their assets. The Operating Partnership and its Restricted Subsidiaries
also are required to maintain total unencumbered assets (as defined in the
Indenture) of at least 150% of their unsecured indebtedness on a consolidated
basis. These covenants and definitions contain important exceptions, limitations
. . .
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
The disclosure contained in Item 1.01 above is incorporated herein by reference.
Item 3.03 Material Modification to Rights of Security Holders.
The disclosure contained in Item 1.01 above is incorporated herein by reference.
The Indenture described in Item 1.01 contains a covenant that restricts the
Company's ability to pay dividends in certain circumstances.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
Exhibit
Number Exhibit Description
4.1 Indenture, dated October 7, 2020, by and among QualityTech, LP, QTS
Finance Corporation, QTS Realty Trust, Inc., certain subsidiaries of
QualityTech, LP and Deutsche Bank Trust Company Americas.
4.2 Form of Global Note representing the Notes (included as Exhibit A to
Exhibit 4.1 hereof).
104 Cover Page Interactive Data File (embedded within the Inline XBRL
document).
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