Kilroy Realty 8-K 2007
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Pursuant to Section 13 OR 15 (d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 11, 2007
KILROY REALTY CORPORATION
(Exact name of registrant as specified in its charter)
Registrants telephone number, including area code: (310) 481-8400
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2.):
On April 11, 2007, the Companys operating subsidiary, Kilroy Realty, L.P. (the Operating Partnership), issued an additional $60,000,000 in aggregate principal amount of its 3.250% Exchangeable Senior Notes due 2012 (the Additional Notes) to qualified institutional buyers in connection with the exercise by the initial purchasers (the Initial Purchasers) of their overallotment option.
The Additional Notes and the shares of common stock, par value $0.01 (the Common Stock) of the Company issuable in certain circumstances upon exchange of the Additional Notes have not been registered under the Securities Act of 1933, as amended (the Securities Act). The Operating Partnership offered and sold the Additional Notes in reliance on the exemption from registration provided by Section 4(2) of the Securities Act. The Initial Purchasers then resold the Additional Notes to qualified institutional buyers pursuant to the exemption from registration provided by Rule 144A under the Securities Act.
On April 4, 2007, in connection with the offering of the Additional Notes, the Operating Partnership also entered into amendments (the Hedge Transaction Amendments) to the call option transactions (the Hedge Transactions) originally entered into on March 27, 2007 with JPMorgan Chase Bank, National Association, Bank of America, N.A. and Lehman Brothers Inc. The Hedge Transaction Amendments will cover, subject to customary anti-dilution adjustments, approximately 681,508 shares of Common Stock at a strike price of $88.04, which corresponds to the initial exchange price of the Additional Notes. The Operating Partnership paid an aggregate of approximately $4,050,000 for the Hedge Transaction Amendments.
The Hedge Transactions, as amended, are expected generally to reduce the potential dilution upon exchange of the Additional Notes and the $400,000,000 aggregate principal amount of the Operating Partnerships 3.250% Exchangeable Senior Notes due 2012 (together with the Additional Notes, the Notes) in the event that the market value per share of the Common Stock, as measured under the terms of the Hedge Transactions, as amended, on the relevant settlement date is greater than the strike price of the Hedge Transactions, as amended, which corresponds to the initial exchange price of the Notes. If, however, the market value per share of the Common Stock exceeds $102.72 (the Cap Price), then the dilution mitigation under the Hedge Transactions, as amended, will be capped, which means that there would be dilution from exchange of the Notes to the extent that the market value per share of the Common Stock exceeds the Cap Price. These transactions generally have the effect of increasing the point at which dilution of the Companys Common Stock would occur from the exchange of Notes for Common Stock to $102.72 per share of Common Stock, representing a 40% premium based on the closing sales price of the Common Stock as reported on the New York Stock Exchange on March 27, 2007 of $73.37.
The Hedge Transactions, as amended, are separate transactions entered into by the Operating Partnership with the relevant financial institutions, are not part of the terms of the Notes, and will not affect the holders rights under the Notes. Holders of the Notes will not have any rights with respect to the Hedge Transactions, as amended.
The Hedge Transaction Amendments are filed herewith as exhibits 10.1, 10.2 and 10.3 and are incorporated herein by reference.
On April 11, 2007, the Operating Partnership issued $60,000,000 in aggregate principal amount of Additional Notes in connection with the exercise by the Initial Purchasers of their overallotment option. The Additional Notes are general senior unsecured obligations of the Operating Partnership and rank equally in right of payment with all other senior unsecured indebtedness of the Operating Partnership. Interest is payable on April 15 and October 15 of each year beginning October 15, 2007 until the maturity date of April 15, 2012. The Operating Partnerships obligations under the Additional Notes are fully and unconditionally guaranteed by the Company.
The Additional Notes bear interest at 3.250% per annum and contain an exchange settlement feature, which provides that the Additional Notes may, under certain circumstances, be exchangeable for cash (up to the principal amount of the Additional Notes) and, with respect to any excess exchange value, into shares of Common Stock at an initial exchange rate of 11.3580 shares per $1,000 principal amount of Additional Notes. At the initial exchange rate, the Additional Notes are exchangeable for Common Stock at an exchange price of $88.04 per share, representing an approximately 20% premium over the last reported sale price of the Common Stock on March 27, 2007, which was $73.37 per share.
Prior to November 15, 2011, the Additional Notes will be exchangeable at the option of the holders only under the following circumstances: (1) during any calendar quarter beginning after June 30, 2007 if the closing sale price per share of the Common Stock is more than 130% of its exchange price for at least 20 trading days in the period of 30 consecutive trading days ending on the last trading day of the preceding calendar quarter; (2) during the five consecutive trading-day period following any five consecutive trading days in which the trading price per $1,000 principal amount of Additional Notes was less than 98% of the product of the closing sale price per share of the Common Stock multiplied by the applicable exchange rate; (3) if the Additional Notes have been called for redemption; (4) upon the occurrence of specified corporate transactions described in the offering memorandum; or (5) if the Common Stock ceases to be listed or approved for quotation for 30 consecutive trading days. On or after November 15, 2011, the Additional Notes will be exchangeable at any time prior to the close of business on the second business day immediately preceding the maturity date. Subject to its election to satisfy its exchange obligations entirely in shares of Common Stock, upon exchange, the Operating Partnership will deliver cash and shares of Common Stock, if any, based on a daily exchange value calculated on a proportionate basis for each day of a 50 trading-day observation period. At any time prior to November 15, 2011, the Operating Partnership may irrevocably elect, in its sole discretion without the consent of the holders of the Additional Notes, to settle all of our future exchange obligations entirely in shares of Common Stock.
The Operating Partnership may not redeem the Additional Notes except to preserve the Companys status as a real estate investment trust for U.S. federal income tax purposes.
The holders of the Additional Notes have the right to require the Operating Partnership to repurchase the Additional Notes in cash in whole or in part in the event of a designated event for a repurchase price equal to 100% of the principal amount of the Additional Notes plus accrued and unpaid interest. The holders of the Additional Notes who exchange their Additional Notes in connection with a designated event of the type described in the first two bullets of the definition of designated event, as described below, may be entitled to a make-whole premium in the form of an increase in the exchange rate.
A designated event will be deemed to have occurred at the time that any of the following occurs:
Certain events are considered Events of Default, which may result in the accelerated maturity of the Additional Notes, including:
The information contained in Items 1.01 and 2.03 of this report is incorporated herein by reference.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.