Kilroy Realty 8-K 2009
Documents found in this filing:
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):
November 20, 2009
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 November 20, 2009, Kilroy Realty, L.P. (the Operating Partnership) issued $150,000,000 in aggregate principal amount of its 4.25% Exchangeable Senior Notes due 2014 (the Notes). On November 24, 2009, the Operating Partnership issued an additional $22,500,000 in aggregate principal amount of additional Notes pursuant to the option granted to the initial purchasers to purchase additional Notes solely to cover overallotments, if any. The terms of the Notes are governed by an indenture, dated as of November 20, 2009 (the Indenture), by and among the Operating Partnership, as issuer, Kilroy Realty Corporation, as guarantor (the Company), and U.S. Bank National Association, as trustee. A copy of the Indenture, including the form of the Notes and the guarantee, the terms of which are incorporated herein by reference, is attached as Exhibit 4.1 to this report. See Item 2.03 below for additional information.
The Notes, including the guarantee, and the shares of common stock, par value $0.01 (the Common Stock) of the Company issuable in certain circumstances upon exchange of the Notes have not been registered under the Securities Act of 1933, as amended (the Securities Act). The Operating Partnership offered and sold the Notes to the initial purchasers of the Notes (the Initial Purchasers) in reliance on the exemption from registration provided by Section 4(2) of the Securities Act. The Initial Purchasers then sold the Notes to qualified institutional buyers pursuant to the exemption from registration provided by Rule 144A under the Securities Act.
On November 20, 2009, in connection with the issuance and sale of the Notes, the Operating Partnership and the Company also entered into a registration rights agreement with the Initial Purchasers (the Registration Rights Agreement). A copy of the Registration Rights Agreement, the terms of which are incorporated herein by reference, is attached as Exhibit 10.1 to this report.
Pursuant to the Registration Rights Agreement, the Company has agreed that it will:
If the Company does not meet these deadlines then, subject to certain exceptions, additional interest will accrue on the Notes to be paid semi-annually in arrears at a rate per year equal to 0.25% of the principal amount of Notes to and including the 90th day following such registration default and 0.50% of the principal amount thereafter, for the period during which the registration default is not cured.
On November 16, 2009, in connection with the offering of $150,000,000 in aggregate principal amount of the Notes, the Operating Partnership also entered into call option transactions (the Initial Hedge Transactions) with affiliates of certain Initial Purchasers. The Initial Hedge Transactions cover, subject to customary anti-dilution adjustments, 4,174,605 shares of Common Stock at a strike price of $35.93, which corresponds to the initial exchange price of the Notes. The Operating Partnership paid an aggregate amount of approximately $10,545,000 for the Initial Hedge Transactions.
On November 20, 2009, in connection with the issuance of $22,500,000 in aggregate principal amount of additional Notes, the Operating Partnership also entered into additional call option transactions (the
Additional Hedge Transactions and collectively with the Initial Hedge Transactions, the Hedge Transactions) with the same affiliates of certain Initial Purchasers. The Additional Hedge Transactions cover, subject to customary anti-dilution adjustments, an additional 626,190 shares of Common Stock at the same strike price of $35.93. The Operating Partnership paid an aggregate amount of approximately $1,581,750 for the Additional Hedge Transactions.
The Hedge Transactions are expected generally to reduce the potential dilution upon exchange of the Notes in the event that the market value per share of the Common Stock, as measured under the terms of the Hedge Transactions, is greater than the strike price of the Hedge Transactions, which corresponds to the initial exchange price of the Notes and is subject to certain adjustments similar to those applicable to the exchange price of the Notes. To the extent that the market value per share of the Common Stock, as measured under the terms of the Hedge Transactions, is greater than $42.81 (the Cap Price), which represents a premium of approximately 40% over the closing sale price of the Common Stock as reported on the New York Stock Exchange on November 16, 2009, and is subject to certain adjustments similar to those applicable to the strike price of the Hedge Transactions and the exchange price of the Notes, then the dilution mitigation under the Hedge Transactions will be limited, which means that there would be dilution upon the exchange of the Notes for the Common Stock to the extent that the market value per share of the Common Stock, as measured under the terms of the Hedge Transactions, exceeds the Cap Price. Subject to the performance of the Hedge Transactions by the counterparties, these transactions generally have the effect of increasing the price at which dilution of the Companys Common Stock would occur from the exchange of Notes for Common Stock from the exchange price of $35.93 per share of Common Stock to $42.81 per share of Common Stock.
The Hedge Transactions are separate transactions entered into by the Company 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.
Copies of the letter confirmations with respect to the Hedge Transactions, the terms of which are incorporated herein by reference, are attached as Exhibits 10.2, 10.3, 10.4 and 10.5 to this report.
On November 20, 2009, the Operating Partnership issued $150,000,000 in aggregate principal amount of Notes. The Notes are senior unsecured obligations of the Operating Partnership and rank equally in right of payment with all other existing and future senior unsecured indebtedness of the Operating Partnership. Interest is payable on May 15 and November 15 of each year beginning May 15, 2010 until the maturity date of November 15, 2014. The Operating Partnerships obligations under the Notes are fully and unconditionally guaranteed by the Company.
The Notes bear interest at 4.25% per annum and contain an exchange settlement feature, which provides that the Notes may, under certain circumstances, be exchangeable for cash (up to the principal amount of the Notes) and, with respect to any exchange value above the principal amount, into shares of Common Stock at an initial exchange rate of 27.8307 shares of Common Stock per $1,000 principal amount of Notes, subject to adjustment of the exchange rate under certain circumstances. At the initial exchange rate, the Notes are exchangeable for Common Stock at an exchange price of approximately $35.93 per share of Common Stock, representing an approximately 17.5% premium over the last reported sale price of the Common Stock on November 16, 2009, which was $30.58 per share.
Prior to August 15, 2014, the Notes will be exchangeable at the option of the holders only under the following circumstances: (1) during any calendar quarter beginning December 31, 2009 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 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 Notes have been called for redemption; (4) upon the occurrence of specified corporate transactions described in the Indenture; or (5) if the Common Stock ceases to be listed or approved for trading on the New York Stock Exchange, the NASDAQ Global Select Market, the NASDAQ Global Market or the NASDAQ Capital Market. On or after August 15, 2014, the 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 30 trading-day observation period. At any time prior to August 14, 2014, the Operating Partnership may irrevocably elect, in its sole discretion without the consent of the holders of the Notes, to settle all of its future exchange obligations entirely in shares of Common Stock.
The Operating Partnership may not redeem the Notes prior to their maturity date except to preserve the Companys status as a real estate investment trust for U.S. federal income tax purposes.
The holders of the Notes have the right to require the Operating Partnership to repurchase the 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 Notes plus accrued and unpaid interest. The holders of the Notes who exchange their 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 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.
Date: November 25, 2009