Annual report pursuant to Section 13 and 15(d)

Orion Office REIT, Debt, Net

v3.22.1
Orion Office REIT, Debt, Net
 12 Months Ended
Dec. 31, 2021
Debt Disclosure [Abstract]  
Debt, Net
Note 6 – Debt, Net
As of December 31, 2021, the Company had $616.8 million of debt outstanding, including net deferred financing costs, with a weighted-average years to maturity of 1.2 years and a weighted-average interest rate of 2.77%. The following table summarizes the carrying value of debt as of December 31, 2021 and December 31, 2020, and the debt activity for the year ended December 31, 2021 (in thousands):
Year Ended December 31, 2021
Balance as of December 31, 2020 Debt Issuances Repayments, Extinguishment and Assumptions Accretion and Amortization Balance as of December 31, 2021
Mortgages payable:
Outstanding balance $ 36,476  $ —  $ (36,476) $ —  $ — 
Premium, net 576  —  (516) (60) — 
Mortgages payable, net 37,052  —  (36,992) (60) — 
Bridge facility:
Outstanding balance
 —  355,000  —  —  355,000 
Deferred costs —  (888) —  245  (643)
Bridge facility, net —  354,112  —  245  354,357 
Credit facility term loan:
Outstanding balance —  175,000  —  —  175,000 
Deferred costs —  (2,695) —  185  (2,510)
Credit facility term loan, net —  172,305  —  185  172,490 
Credit facility revolver:
Outstanding balance —  90,000  —  —  90,000 
Credit facility revolver, net —  90,000  —  —  90,000 
Total debt $ 37,052  $ 616,417  $ (36,992) $ 370  $ 616,847 
Credit Agreement
In connection with the Separation and the Distribution, on November 12, 2021, the Company, as parent, and Orion Office REIT LP (“Orion OP”), as borrower, entered into (i) a credit agreement (the “Revolver/Term Loan Credit Agreement”) providing for a three-year, $425 million senior revolving credit facility (the “Revolving Facility”), including a $25 million letter of credit sub-facility, and a two-year, $175.0 million senior term loan facility (the “Term Loan Facility,” and together with the Revolving Facility, the “Revolver/Term Loan Facilities”) with Wells Fargo Bank, National Association, as administrative agent, and the lenders and issuing banks party thereto and (ii) a credit agreement (the “Bridge Credit Agreement,” and together with the Revolver/Term Loan Credit Agreement, the “Credit Agreements”) providing for a 6-month, $355.0 million senior bridge term loan facility (the “Bridge Facility,” and together with the Revolver/Term Loan Facilities, the “Facilities”) with Wells Fargo Bank, National Association, as administrative agent, and the lenders party thereto.
On November 12, 2021, Orion OP borrowed $90.0 million under the Revolving Facility, and each of the Term Loan Facility and the Bridge Facility was fully drawn. Approximately $595.0 million of the net proceeds of the Facilities was distributed to Realty Income in accordance with the Separation and Distribution Agreement. Orion OP retained the remaining net proceeds of such borrowings as working capital that will be used for the general corporate purposes of the Company, Orion OP and Orion OP’s subsidiaries. As of December 31, 2021, the Company had approximately $620.0 million of total consolidated debt outstanding and $335.0 million of availability under the Revolving Facility.
The Bridge Facility is subject to one 6-month extension option at the election of Orion OP. The exercise of such extension option requires the payment of an extension fee and the satisfaction of certain other customary conditions. The Bridge Facility was refinanced with a $355.0 million mortgage loan during February 2022 (see Note 15 – Subsequent Events below).
The interest rate applicable to the loans under the Facilities may, at the election of Orion OP, be determined on the basis of LIBOR or a base rate, in either case, plus an applicable margin. Under the Revolver/Term Loan Facilities, the applicable margin is (1) in the case of the Revolving Facility, 2.50% for LIBOR loans and 1.50% for base rate loans and (2) in the case of the Term Loan Facility, 2.50% for LIBOR loans and 1.50% for base rate loans. Under the Bridge Facility, the applicable margin for LIBOR loans was initially 2.50% with scheduled increases over time to a maximum of 3.50% and the applicable margin on base rate loans was initially 1.50% with scheduled increases over time to a maximum of 2.50%, in each case, based on the number of days elapsed after November 12, 2021. Loans under the Revolver/Term Loan Facilities may be prepaid, and unused commitments under the Revolver/Term Loan Facilities may be reduced, at any time, in whole or in part, without premium or penalty (except for LIBOR breakage costs).
To the extent that amounts under the Revolving Facility remain unused, Orion OP is required to pay a quarterly commitment fee on the unused portion of the Revolving Facility in an amount equal to 0.25% per annum of the unused portion of the Revolving Facility.
The Revolver/Term Loan Facilities are guaranteed pursuant to a Guaranty (the “Revolver/Term Loan Guaranty”) and the Bridge Facility was guaranteed pursuant to a Guaranty (the “Bridge Guaranty”), in each case, by the Company and, subject to certain exceptions, substantially all of Orion OP’s existing and future subsidiaries (including substantially all of its subsidiaries that directly or indirectly own unencumbered real properties), other than certain joint ventures and subsidiaries that own real properties subject to certain other indebtedness (such subsidiaries of Orion OP, the “Subsidiary Guarantors”).
The Revolver/Term Loan Facilities are secured by, among other things, first priority pledges of the equity interests in the Subsidiary Guarantors.
The Revolver/Term Loan Facilities require that Orion OP comply with various covenants, including, without limitation, covenants restricting, subject to certain exceptions, liens, investments, mergers, asset sales and the payment of certain dividends. In addition, the Revolver/Term Loan Facilities require that Orion OP satisfy certain financial covenants, including a:
•ratio of total debt to total asset value of not more than 0.60 to 1.00;
•ratio of adjusted EBITDA to fixed charges of not less than 1.50 to 1.00;
•ratio of secured debt to total asset value of not more than 0.45 to 1.00;
•ratio of unsecured debt to unencumbered asset value of not more than 0.60 to 1.00; and
•ratio of net operating income from all unencumbered real properties to unsecured interest expense of not less than 2.00 to 1.00.
As of December 31, 2021, Orion OP was in compliance with these financial covenants.
The Revolver/Term Loan Facilities include customary representations and warranties of the Company and Orion OP, which must be true and correct in all material respects as a condition to future extensions of credit under the Revolver/Term Loan Facilities. The Revolver/Term Loan Facilities also include customary events of default, the occurrence of which, following any applicable grace period, would permit the lenders to, among other things, declare the principal, accrued interest and other obligations of Orion OP under the Revolver/Term Loan Facilities to be immediately due and payable and foreclose on the collateral securing the Revolver/Term Loan Facilities.