New York-based commercial real estate lender iStar Financial has received nearly $3 billion in new loans which will be used to pay off previous borrowings.
These consist of a $1.5 billion A-1 tranche due on June 28, 2013 and a $1.45 billion A-2 tranche due on June 30, 2014. The A-1 tranche has an interest rate of Libor plus 3.75%, while the A-2 is at Libor plus 5.75%. The floor on both loans is at 1.25%.
Both tranches are secured by a first lien on $3.7 billion in iStar assets. Proceeds from principal repayments and sales of collateral will be applied to amortize outstanding borrowings, starting with the A-1 tranche.
Under the agreement, a minimum of $200 million of the A-1 tranche must be amortized by Dec. 30. The next target is $450 million by June 30, 2012, $750 million by Dec. 31, 2012 and the full amount by June 28, 2013.
The amortization schedule for the A-2 tranche calls for $150 million due after the A-1 is paid off and additional payments of $150 million due by each six month anniversary until maturity.
Proceeds will be used to refinance iStar's existing secured bank facilities due in June 2011 and 2012, to repay unsecured debt maturing this year and for other corporate purposes.
Covenants in the agreement include one to maintain collateral coverage of not less than 1.25 times outstanding borrowings. But there are no covenants requiring iStar to maintain a minimum net worth, having a fixed charge coverage or keep a minimum level of unencumbered assets.
Joint lead arrangers and joint bookrunners are JP Morgan Securities LLC, Barclays Capital and RBS Securities Inc.
