UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported) June 27, 2013
Ares Commercial Real Estate Corporation
(Exact name of registrant as specified in its charter)
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Maryland |
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001-35517 |
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45-3148087 |
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(State or Other Jurisdiction |
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(Commission |
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(IRS Employer |
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One North Wacker Drive, 48th Floor, Chicago, IL |
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60606 |
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(Address of Principal Executive Offices) |
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(Zip Code) |
Registrant’s telephone number, including area code (312) 252-7500
N/A
(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 Instruction A.2. below):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 1.01 Entry into a Material Definitive Agreement.
On June 27, 2013, ACRC Lender W LLC (“Lender W”), a wholly owned subsidiary of Ares Commercial Real Estate Corporation (the “Company”), amended its secured funding facility with Wells Fargo Bank, National Association (“Wells Fargo”), as lender (as amended, the “Wells Fargo Facility”) to, among other things, increase the size of the facility from $172.45 million to $225 million. In connection with the amendment, the Company entered into an amendment to the substitute Guarantee Agreement modifying its obligations to Wells Fargo in connection with the Wells Fargo Facility.
In addition to increasing the size of the facility, the Wells Fargo Facility amendment reduced the pricing on the facility from a range of LIBOR plus a pricing margin of 2.50 percent to 2.75 percent to a range of LIBOR plus a margin of 2.00 percent to 2.50 percent and granted Lender W the right to use the Wells Fargo Facility for certain future funding obligations, subject to the requirements set forth in the amendment. The Wells Fargo Facility amendment and Guarantee Agreement amendment also modified certain financial tests and covenants to allow Lender W to more effectively utilize the Wells Fargo Facility.
The foregoing description is only a summary of certain material provisions of the amendments to the Wells Fargo Facility and the Guarantee Agreement and is qualified in its entirety by reference to a copy of such amendments, which are filed herewith as Exhibits 10.1 and 10.2 and by this reference incorporated herein.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
The information required by Item 2.03 contained in Item 1.01 of this Current Report on Form 8-K is incorporated herein by reference.
Item 8.01 Other Events.
On June 28, 2013 the Company issued a press release announcing that it had increased the size of the Wells Fargo Facility. A copy of the press release is filed herewith as Exhibit 99.1 and incorporated herein by reference. The information disclosed in and pursuant to this paragraph, including Exhibit 99. 1 hereto, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 and shall not be deemed incorporated by reference into any filing made under the Securities Act of 1933, except as expressly set forth by specific reference in such filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits:
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Exhibit |
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Exhibit Description |
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10.1 |
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Amendment No. 2 to Master Repurchase and Securities Contract, dated as of June 27, 2013, among ACRC Lender W LLC, as seller, and Wells Fargo Bank, National Association, as buyer. |
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10.2 |
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Amendment No. 2 to Guarantee Agreement, dated as of June 27, 2013, among Ares Commercial Real Estate Corporation, as guarantor, in favor of Wells Fargo Bank, National Association, as buyer. |
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99.1 |
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Press Release, dated June 28, 2013. |
SIGNATURE
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: June 28, 2013
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ARES COMMERCIAL REAL ESTATE CORPORATION | |
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By: |
/s/ Timothy B. Smith |
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Name: |
Timothy B. Smith |
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Title: |
Vice President |
Exhibit Index
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Exhibit |
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Exhibit Description |
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10.1 |
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Amendment No. 2 to Master Repurchase and Securities Contract, dated as of June 27, 2013, among ACRC Lender W LLC, as seller, and Wells Fargo Bank, National Association, as buyer. |
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10.2 |
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Amendment No. 2 to Guarantee Agreement, dated as of June 27, 2013, among Ares Commercial Real Estate Corporation, as guarantor, in favor of Wells Fargo Bank, National Association, as buyer. |
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99.1 |
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Press Release, dated June 28, 2013. |
Exhibit 10.1
Execution Version
AMENDMENT NO. 2 TO MASTER REPURCHASE AND SECURITIES CONTRACT
AMENDMENT NO. 2 TO MASTER REPURCHASE AND SECURITIES CONTRACT, dated as of June 27, 2013 (this “Amendment”), between ACRC LENDER W LLC, a Delaware limited liability company (“Seller”), and WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association (“Buyer”). Capitalized terms used but not otherwise defined herein shall have the meanings given to them in the Repurchase Agreement (as defined below).
RECITALS
WHEREAS, Seller and Buyer are parties to that certain Master Repurchase and Securities Contract, dated as of December 14, 2011 (as amended by Buyer, Seller and Guarantor pursuant to Amendment No. 1 to Master Repurchase and Securities Contract dated as of May 22, 2012 (“Amendment No. 1”), and as amended, restated, supplemented or otherwise modified and in effect from time to time, the “Repurchase Agreement”); and
WHEREAS, Seller and Buyer have agreed to further amend certain provisions of the Repurchase Agreement in the manner set forth herein.
Therefore, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller and Buyer each hereby agree as follows:
SECTION 1. Amendments to Repurchase Agreement.
(a) The defined terms “Credit Event”, “Defaulted Asset”, “EBITDA”, “Interest Expense”, “Maximum Amount”, “Purchase Price”, “Repurchase Price”, “Senior Interest” and “Sub-Limit”, as set forth in Article 2 of the Repurchase Agreement, are hereby amended and restated in their entirety to read as follows:
“Credit Event”: The determination by Buyer, in its commercially reasonable judgment, that any of the following events or any similar event, occurrence or condition has occurred: (i) an Insolvency Event with respect to any Underlying Obligor, (ii) any monetary or material non-monetary event of default under the terms of any Purchased Asset after giving effect to any applicable notice, grace or cure periods, (iii) failure of a Purchased Asset to qualify as an Eligible Asset, (iv) the deterioration in value of any Mortgaged Property relating to any Purchased Asset (other than due to fluctuations in current interest rates and spreads) such that the PPV Test with respect to any Purchased Asset is violated, (v) any drop in the net operating income or cash flow of any Purchased Asset or the Mortgaged Property related thereto such that (A) the Debt Yield Test is violated and (B) a Margin Deficit with respect to any Purchased Asset exists in an amount greater than $500,000, (vi) the loss of any security interest (or the priority thereof) under this Agreement or any documents executed in connection with this Agreement, or any document executed in connection with any Underlying Mortgage Loan, (vii) any Transaction fails to qualify for safe harbor treatment
under the Bankruptcy Code, as described in Article 14 of this Agreement, (viii) Seller fails to deliver the Mortgage Loan File to the Custodian within the applicable time periods provided in the Custodial Agreement, subject to any applicable cure periods set forth therein, (ix) any material breach of a representation or warranty with respect to any Purchased Asset occurs and is not cured within the applicable cure periods set forth in the documents executed in connection with the applicable Underlying Mortgaged Property (x) any statement, affirmation or certification made or information, document, agreement, report or notice delivered by Seller to Buyer is untrue in any material respect, (xi) the Minimum Portfolio Debt Yield Test is violated, and (xii) Buyer determines that a Material Adverse Effect has occurred or that such Purchased Asset is otherwise unlikely to be collectible on a timely basis.
“Defaulted Asset”: Any Asset or Purchased Asset, as applicable, (a) that is thirty (30) or more days (or, in the case of payments due at maturity, one (1) day) delinquent in the payment of principal, interest, fees, distributions or any other amounts payable under the related Mortgage Loan Documents, (b) for which there is a Representation Breach with respect to such Asset or Purchased Asset, other than an Approved Representation Exception, (c) for which there is a monetary default or a material non–monetary default under the related Mortgage Loan Documents beyond any applicable notice or cure period, (d) as to which an Insolvency Event has occurred with respect to the related Underlying Obligor, or (e) for which Seller or Interim Servicer has received notice of the foreclosure or proposed foreclosure of any Lien on the related Underlying Mortgaged Property.
“EBITDA”: With respect to any Person and for any Test Period, an amount equal to the sum of (a) Net Income (or loss) of such Person (prior to any impact from minority or non-controlling interests or joint venture net income and before deduction of any dividends on preferred stock of such Person), plus the following (but only to the extent actually included in determination of such Net Income (or loss)): (i) depreciation and amortization expense (other than those related to capital expenditures that have not been included in the calculation of Fixed Charges as defined in the Guarantee Agreement), (ii) Interest Expense, (iii) income tax expense, (iv) extraordinary or non-recurring gains, losses and expenses including but not limited to transaction expenses relating to business combinations, other acquisitions and unconsummated transactions, (v) unrealized loan loss reserves, impairments and other similar charges including but not limited to reserves for loss sharing arrangement associated with mortgage servicing rights, (vi) realized losses on loans and loss sharing arrangements associated with mortgage servicing rights and (vii) unrealized gains, losses and expenses associated with (A) derivative liabilities including but not limited to convertible note issuances and (B) mortgage servicing rights (other than the initial revenue recognition of recording an asset), plus (b) such Person’s proportionate share of Net Income (prior to any impact from minority or non-controlling interests or joint venture net income and before deduction of any dividends on preferred stock of such Person) of the joint venture investments and unconsolidated Affiliates of such Person, all with respect to such period.
“Interest Expense”: With respect to any Person and for any Test Period, the amount of total interest expense incurred by such Person, including capitalized or accruing interest (but excluding interest funded under a construction loan, the amortization of financing costs, and the payment of origination fees), plus such Person’s proportionate share of interest expense from the joint venture investments and unconsolidated Affiliates of such Person, all with respect to such period.
“Maximum Amount”: $225,000,000, which Maximum Amount shall not be increased by any Future Funding Transaction or reduced upon the repurchase of any Purchased Assets; provided, that on and after the Facility Termination Date, the Maximum Amount on any date shall be the aggregate Purchase Price outstanding for all Transactions as of such date, as such amount declines over the term hereof as Purchased Assets are repurchased and Margin Deficits are satisfied.
“Purchase Price”: For any Purchased Asset, (a) as of the Purchase Date for such Purchased Asset, an amount equal to the product of the Market Value of such Purchased Asset, times the Applicable Percentage for such Purchased Asset, and (b) as of any other date, the amount described in the preceding clause (a), (i) increased by any Future Funding Amounts disbursed by Buyer to Seller or the related borrower with respect to such Purchased Asset and, (ii) reduced by (x) any amount of Margin Deficit transferred by Seller to Buyer pursuant to Section 4.01 and applied to the Purchase Price of such Purchased Asset, (y) any Principal Payments remitted to the Waterfall Account and which were applied to the Purchase Price of such Purchased Asset by Buyer pursuant to clause fifth of Section 5.02, and (z) any payments made by Seller in reduction of the outstanding Purchase Price.
“Repurchase Price”: For any Purchased Asset as of any date, an amount equal to the sum of (a) the outstanding Purchase Price as of such date, (b) the accrued and unpaid Price Differential for such Purchased Asset as of such date (as increased by any Future Funding Amounts and any other additional funds advanced in connection with such Purchased Asset), (c) all other amounts due and payable as of such date by Seller to Buyer under this Agreement or any Repurchase Document, (d) any accrued and unpaid fees and expenses and indemnity amounts and any other amounts owed by Seller or Guarantor to Buyer or any of its Affiliates under this Agreement or any Repurchase Document and (e) the Exit Fee, if any, applicable to such Purchased Asset on any Early Repurchase Date.
“Senior Interest”: Either (a) a senior or pari passu participation interest in a Whole Loan, or (b) a senior or pari-passu “A-Note” in an “A/B structure” of a Whole Loan.
“Sub-Limit”: The composition of Purchased Assets transferred to Buyer shall at all times meet the following sublimit caps, and no Market Value shall be ascribed to any Purchased Assets:
(a) to the extent that the Market Value ascribed to non-controlling Senior Interests with outstanding Future Funding Amounts would exceed twenty-five percent (25%) of the Maximum Amount;
(b) to the extent that the Market Value ascribed to any one Purchased Asset would exceed twenty-five percent (25%) of the Maximum Amount; and
(c) to the extent that the Market Value ascribed to Purchased Assets, the Type of which consists of hotels, (as determined by Buyer), would exceed fifteen percent (15%) of the Maximum Amount.
(b) The following, new defined terms “Future Funding Amount”, Future Funding Confirmation”, “Future Funding Date”, “Future Funding Request Package”, “Future Funding Transaction”, “Minimum Portfolio Debt Yield Test” and “Multi-Family Asset” are hereby added to Article 2 of the Repurchase Agreement in correct alphabetical order:
“Future Funding Amount”: With respect to any Whole Loan or Senior Interest, the amount of additional funding obligations that were expressly identified to Buyer in connection with the initial Transaction.
“Future Funding Confirmation”: Defined in Section 3.11(a)(i).
“Future Funding Date”: With respect to any Whole Loan or Senior Interest, the date on which Buyer advances any portion of the Future Funding Amount related to such Whole Loan or Senior Interest, as applicable.
“Future Funding Request Package”: With respect to one or more Future Funding Transactions, the following, to the extent applicable and available, unless any such items were previously delivered to Buyer and have not been modified since the date of each such delivery: (a) the executed request for advance (which shall include the applicable Seller’s approval of such future funding); (b) the executed borrower’s affidavit; (c) the escrow agreement, if funding through escrow; (d) copies of all relevant trade contracts; (e) the title policy endorsement for the advance; (f) copies of any tenant leases; (g) copies of any service contracts; (h) updated financial statements, operating statements and rent rolls; (i) evidence of required insurance; (j) updates to the engineering report, if required; and (k) copies of any additional documentation as required in connection therewith pursuant to the related Underlying Loan Documents.
“Future Funding Transaction”: An additional Transaction requested with respect to any Whole Loan or Senior Interest to provide for the advance of additional funds that were expressly identified to Buyer in connection with the
initial Transaction entered into in respect of such Whole Loan or Senior Interest, as applicable.
“Minimum Portfolio Debt Yield Test”: The meaning set forth in the Fee Letter, which definition is incorporated herein by reference.
“Multi-Family Asset”: Any Purchased Asset for which the majority or all of the Underlying Mortgaged Property consists of multiple separate housing units for residential (i.e. non-commercial) inhabitants, which may be contained either in one building or in several buildings within a single complex.
(c) The following new sentence is hereby added to the end of the defined term “Eligible Asset”, as set forth in Article 2 of the Repurchase Agreement:
For the avoidance of doubt, Buyer’s agreement to accept an Asset with a future funding obligation shall be deemed to be a permanent waiver of clause (d) of the definition of Eligible Asset with respect to such Asset, provided, however that such waiver shall not be deemed a waiver of such requirement with respect to any other Asset or Purchased Asset.
(d) The reference to “Schedule 1” as set forth in Section 3.07(b) of the Repurchase Agreement, is hereby revised to read “Schedule 3”.
(e) The following, new Section 3.11 is hereby added to the Repurchase Agreement in correct numerical order:
SECTION 3.11 Future Funding Transactions. Buyer’s agreement to enter into any Future Funding Transaction is subject to the satisfaction of the following conditions precedent, both immediately prior to entering into such Future Funding Transaction and also after giving effect to the consummation thereof:
(i) Seller shall give Buyer written notice of each Future Funding Transaction, together with a signed, written confirmation in the form of Exhibit J attached hereto prior to each Future Funding Transaction (a “Future Funding Confirmation”), signed by a Responsible Officer of Seller. Each Future Funding Confirmation shall identify the related Whole Loan and/or Senior Interest, shall identify Buyer and Seller and shall be executed by both Buyer and Seller; provided, however, that Buyer shall not be liable to Seller if it inadvertently acts on a Future Funding Confirmation that has not been signed by a Responsible Officer of Seller. Each Future Funding Confirmation, together with this Agreement, shall be conclusive evidence of the terms of the Future Funding Transaction covered thereby, and shall be construed to be cumulative to the extent possible. If terms in a Future Funding Confirmation are inconsistent with terms in this Agreement with respect to a particular Future Funding Transaction, other than with respect to the Applicable Percentage and
Maximum Applicable Percentage set forth in such Future Funding Confirmation, this Agreement shall prevail.
(ii) No less than seven (7) Business Days prior to the proposed Future Funding Date, Seller shall deliver to Buyer a Future Funding Request Package. Buyer shall have the right to conduct an additional due diligence investigation of the Future Funding Request Package and/or the related Whole Loan and/or Senior Interest as Buyer determines. Prior to the approval of each proposed Future Funding Transaction by Buyer, Buyer shall have determined, in its sole and absolute discretion, that all of the applicable conditions precedent for a Transaction, as described in Section 6.02(b), (e), (f) and (h) have been met by Seller and that the consummation of the related Future Funding Transaction would not otherwise cause Seller to breach the Minimum Portfolio Debt Yield Test. So long as all such conditions have been satisfied, no Default or Event of Default then-currently exist and Buyer has determined, in its sole and absolute discretion, that, if Buyer has not purchased from Seller a complete ownership interest in the entire related Whole Loan, that all of the terms and conditions relating to the splitting of such Whole Loan into multiple interests are satisfactory to Buyer in all respects, then Buyer shall be required to approve the related Future Funding Transaction on a timely basis.
(iii) Upon the approval by Buyer of a particular Future Funding Transaction, Buyer shall deliver to Seller a signed copy of the related Future Funding Confirmation described in clause (i) above, on or before the scheduled date of the underlying proposed Future Funding Transaction. On the Future Funding Date for the Future Funding Transaction, which shall occur no later than three (3) Business Days after the final approval of the Future Funding Transaction by Buyer, the Future Funding Amount shall be transferred by Buyer to Seller or, at Buyer’s direction and only after the delivery of prior notice thereof to Seller, to the related Underlying Obligor.
(f) Section 7.16 of the Repurchase Agreement is hereby amended and restated in its entirety to read as follows:
Section 7.16. Chief Executive Office; Jurisdiction of Organization. On the Effective Date, Seller’s chief executive office, is, and has been, located at One North Wacker Drive, 48th Floor, Chicago, Illinois 60606. On the Effective Date, Seller’s jurisdiction of organization is Delaware. Seller shall provide Buyer with thirty (30) days advance notice of any change in Seller’s principal office or place of business or jurisdiction. Seller has no trade name. During the preceding five (5) years, Seller has not been known by or done business under any other name, corporate or fictitious, and has not filed or had filed against it any bankruptcy receivership or similar petitions nor has it made any assignments for the benefit of creditors.
(g) Section 10.01(a) of the Repurchase Agreement is hereby amended and restated in its entirety to read as follows:
(a) Seller fails to make a payment of (i) Margin Deficit or Repurchase Price (other than Price Differential) when due, whether by acceleration or otherwise (including, if applicable, any Future Funding Amounts related to a Future Funding Transaction), (ii) Price Differential within one (1) Business Day of when due, or (iii) any other amount within two (2) Business Days of when due unless Seller did not have knowledge of such required payment, in which case within two (2) Business Days after receipt of notice that such payment is due and owing, in each case under the Repurchase Documents;
(h) The attached Exhibit J is hereby added to the Repurchase Agreement.
(i) Item number 1 on Schedule 1(b) to the Repurchase Agreement is hereby amended and restated in its entirety to read as follows:
1. The Senior Interest is either (a) a controlling senior or controlling or non-controlling pari-passu participation interest in a Whole Loan or (b) a controlling senior or controlling or non-controlling pari-passu “A-Note” in an “A/B structure” of a Whole Loan.
SECTION 2. Conditions Precedent. This Amendment and its provisions shall become effective on the first date on which this Amendment is executed and delivered by a duly authorized officer of each of Seller and Buyer, (the “Amendment Effective Date”), so long as, on or before the Amendment Effective Date, Buyer has received legal opinions issued by Latham & Watkins LLP and Venable LLP, which are reasonably acceptable to Buyer and its counsel.
SECTION 3. Representations, Warranties and Covenants. Seller hereby represents and warrants to Buyer, as of the date hereof and as of the Amendment Effective Date, that (i) Seller is in compliance in all material respects with all of the terms and provisions set forth in each Repurchase Document to which it is a party on its part to be observed or performed, and (ii) no Default or Event of Default has occurred or is continuing. Seller hereby confirms and reaffirms its representations, warranties and covenants contained in the Repurchase Agreement, except that Seller has changed its location in the past twelve (12) months.
SECTION 4. Acknowledgement. Seller hereby acknowledges that Buyer is in compliance with its undertakings and obligations under the Repurchase Agreement and the other Repurchase Documents.
SECTION 5. Limited Effect. Except as expressly amended and modified by this Amendment, the Amendment No. 2 to the Guarantee Agreement and the Amendment No. 1 to the Fee Letter, the Repurchase Agreement, the Fee Letter, and each of the other Repurchase Documents shall continue to be, and shall remain, in full force and effect in accordance with their respective terms; provided, however, that upon the Amendment Effective Date, (w) each reference therein and herein to the “Repurchase Documents” shall be deemed to include, in any event, this Amendment, (x) each reference to the “Repurchase Agreement” in any of the
Repurchase Documents shall be deemed to be a reference to the Repurchase Agreement as amended hereby, (y) each reference to the “Fee Letter” in any of the Repurchase Documents shall be deemed to be a reference to the Fee Letter as amended by Amendment No. 1 to the Fee Letter, and (z) each reference in the Repurchase Agreement to “this Agreement”, this “Repurchase Agreement”, “hereof”, “herein” or words of similar effect in referring to the Repurchase Agreement shall be deemed to be references to the Repurchase Agreement as amended by this Amendment.
SECTION 6. Counterparts. This Amendment may be executed by each of the parties hereto on any number of separate counterparts, each of which shall be an original and all of which taken together shall constitute one and the same instrument. Delivery of an executed counterpart of a signature page to this Amendment in Portable Document Format (PDF) or by facsimile transmission shall be effective as delivery of a manually executed original counterpart thereof.
SECTION 7. Expenses. Seller agrees to pay and reimburse Buyer for all out-of-pocket costs and expenses incurred by Buyer in connection with the preparation, execution and delivery of this Amendment, including, without limitation, the reasonable fees and disbursements of Cadwalader, Wickersham & Taft LLP, counsel to Buyer.
SECTION 8. GOVERNING LAW.
THIS AMENDMENT AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO OR IN CONNECTION WITH THIS AMENDMENT, THE RELATIONSHIP OF THE PARTIES, AND/OR THE INTERPRETATION AND ENFORCEMENT OF THE RIGHTS AND DUTIES OF THE PARTIES WILL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW PROVISION OR RULE (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY OTHER JURISDICTION.
[SIGNATURES FOLLOW]
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered as of the day and year first above written.
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SELLER | ||
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ACRC LENDER W LLC, a Delaware limited liability company | ||
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By: |
/s/ Timothy B. Smith |
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Name: Timothy B. Smith | |
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Title: Vice President | |
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BUYER | ||
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WELLS FARGO BANK, N.A., a national banking association | ||
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By: |
/s/ John Nelson |
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Name: John Nelson | |
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Title: Managing Director | |
Exhibit 10.2
AMENDMENT NO. 2 TO GUARANTEE AGREEMENT
AMENDMENT NO. 2 TO GUARANTEE AGREEMENT (this “Amendment”), dated effective as of June 27, 2013 (the “Amendment Effective Date”), made by ARES COMMERCIAL REAL ESTATE CORPORATION, a Maryland corporation (“Guarantor”) having its principal place of business c/o Ares Management LLC, One North Wacker Drive, 48th Floor, Chicago, IL 60606, in favor of WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association (“Buyer”) and any of its parent, subsidiary or affiliated companies (collectively, “Beneficiary”).
RECITALS
WHEREAS, pursuant to that certain Master Repurchase and Securities Contract, dated as of December 14, 2011 (the “Original Repurchase Agreement”) between Wells Fargo Bank, National Association (as “Buyer”) and ACRC Lender W LLC (“Seller”), as amended pursuant to Amendment No. 1 to Master Repurchase and Securities Contract between Buyer, Guarantor, ACRC Holdings LLC (as Original Guarantor) and Seller dated April 22, 2012 (the “First Amendment”; together with the Original Repurchase Agreement, as further amended, supplemented or otherwise modified from time to time, the “Repurchase Agreement”), Seller agreed to sell, from time to time, to Buyer certain Whole Loans and Senior Interests, each as defined in the Repurchase Agreement (collectively, the “Purchased Assets”), upon the terms and subject to the conditions as set forth therein;
WHEREAS, in connection with the execution and delivery by the parties thereto of the First Amendment, Guarantor executed and delivered to Buyer a replacement Guarantee Agreement dated as of May 22, 2012, as amended pursuant to Amendment No. 1 to Guarantee Agreement between Guarantor and Buyer dated as of June 29, 2012 (the “Guarantee”); and
WHEREAS, Buyer and Guarantor have agreed to further amend certain provisions of the Guarantee as set forth herein.
NOW, THEREFORE, in consideration of the foregoing premises, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Guarantor hereby agrees with Buyer as follows:
1. Amendment to Guaranty.
(a) The defined term “Liquidity”, as set forth in Section 1 of the Guaranty, is hereby deleted in its entirety.
(b) The defined terms “Debt Service”, “Fixed Charge Coverage Ratio”, “Fixed Charges”, “Tangible Net Worth” and “Total Assets”, as set forth in Section 1 of the Guaranty, are each hereby amended and restated in their entirety to read as follows:
“Debt Service”: For any Test Period, the sum of (a) Interest Expense for Guarantor determined on a consolidated basis for such period, and (b) all regularly scheduled principal payments made
with respect to Indebtedness of Guarantor and its Subsidiaries during such period, other than (i) any voluntary or involuntary prepayment or (ii) prepayment occasioned by the repayment of an underlying asset, or any balloon, bullet, margin or similar principal payment which repays such Indebtedness in part or in full.
“Fixed Charge Coverage Ratio”: With respect to Guarantor at any time, the EBITDA (as determined in accordance with GAAP) for the immediately preceding twelve (12) month period ending on the last date of the applicable Test Period, divided by the Fixed Charges for the immediately preceding twelve (12) month period ending on the last date of the applicable Test Period.
“Fixed Charges”: With respect to Guarantor at any time, the sum of (a) Debt Service, (b) all preferred dividends that Guarantor is required, pursuant to the terms of the certificate of designation or other similar document governing the rights of preferred shareholders, to pay and is not permitted to defer, (c) Capital Lease Obligations paid or accrued during such period, and (d) any amounts payable under any Ground Lease.
“Tangible Net Worth”: With respect to Guarantor at any time, determined on a consolidated basis, all amounts that would be included under capital or shareholder’s equity (or any like caption) on the balance sheet of Guarantor, minus (a) amounts owing to Guarantor from any Affiliate thereof, or from officers, employees, partners, members, directors, shareholders or other Persons similarly affiliated with such Person or any Affiliate thereof, (b) intangible assets, and (c) prepaid taxes and/or expenses, plus deferred origination fees, net of deferred origination costs, all on or as of such date. For the sake of clarity, mortgage servicing rights shall not be deemed to be intangible assets.
“Total Assets”: With respect to Guarantor and any date, an amount, determined on a consolidated basis, equal to the aggregate book value of all assets owned by Guarantor on a consolidated basis and the proportionate share of assets owned by all non-consolidated Subsidiaries of Guarantor, less (a) amounts owing to Guarantor from any Affiliate thereof, or from officers, employees, partners, members, directors, shareholders or other Persons similarly affiliated with Guarantor or any Affiliate thereof, (b) intangible assets (other than Interest Rate Protection Agreements specifically related to the Purchased Assets), and (c) prepaid taxes and expenses, plus deferred origination fees, net of deferred origination costs, all on or as of such date. For the sake of clarity, mortgage servicing rights shall not be deemed to be intangible assets.
(c) Section 9(b) of the Guaranty is hereby deleted in its entirety and replaced with “[Reserved]”.
(d) Section 9(c) of the Guaranty is hereby amended and restated in its entirety to read as follows:
(c) Fixed Charge Coverage Ratio. Commencing on the calendar quarter ending on June 30, 2013, Guarantor shall not permit its Fixed Charge Coverage Ratio for the immediately preceding twelve (12) month period ending on the last date of the applicable Test Period to be less than 1.25 to 1.00, with compliance to be tested as of the end of each Test Period.
2. Limited Effect. Except as expressly amended and modified by this Amendment, the Guarantee shall continue to be, and shall remain, in full force and effect in accordance with its terms; provided, however, that upon the Amendment Effective Date, each (a) reference to the “Guarantee” in any of the Repurchase Documents shall be deemed to be a reference to the Guarantee as amended hereby, and (b) each reference in the Guarantee to “this Agreement”, this “Guarantee”, “hereof”, “herein” or words of similar effect in referring to the Guarantee shall be deemed to be references to the Guarantee as amended by this Amendment.
3. Counterparts. This Amendment may be executed by each of the parties hereto on any number of separate counterparts, each of which shall be an original and all of which taken together shall constitute one and the same instrument. Delivery of an executed counterpart of a signature page to this Amendment in Portable Document Format (PDF) or by facsimile transmission shall be effective as delivery of a manually executed original counterpart thereof.
4. Paragraph Headings. The paragraph headings used in this Guarantee are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof.
5. Governing Law. THIS AMENDMENT AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO OR IN CONNECTION WITH THIS AMENDMENT, THE RELATIONSHIP OF THE PARTIES, AND/OR THE INTERPRETATION AND ENFORCEMENT OF THE RIGHTS AND DUTIES OF THE PARTIES WILL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW, PROVISION OR RULE (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY OTHER JURISDICTION.
[SIGNATURES COMMENCE ON THE FOLLOWING PAGE]
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to Guarantee Agreement to be duly executed and delivered as of the date first above written.
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Guarantor: | ||
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ARES COMMERCIAL REAL ESTATE CORPORATION, a Maryland corporation | ||
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/s/ Timothy B. Smith |
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Name: Timothy B. Smith | |
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Title: Vice President | |
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Beneficiary: | ||
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WELLS FARGO BANK, N.A., a national banking association | ||
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By: |
/s/ John Nelson |
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Name: John Nelson | |
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Title: Managing Director | |
Acknowledged and Agreed to by:
Seller:
ACRC LENDER W LLC, a Delaware limited
liability company
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By: |
/s/ Timothy B. Smith |
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Name: Timothy B. Smith |
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Title: Vice President |
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Exhibit 99.1
Ares Commercial Real Estate Corporation Expands Capacity and Improves Terms on Credit Facility
Wells Fargo Facility Increased by $52.5 million to $225 million
Total Revolving Funding Facility Capacity Increased to $361 million
CHICAGO, IL —June 28, 2013 —Ares Commercial Real Estate Corporation (NYSE: ACRE) announced today that it has expanded its Wells Fargo revolving funding facility from $172.5 million to $225 million. In addition, the pricing on the facility was reduced to a range of LIBOR plus a margin of 2.00 percent to 2.50 percent from a range of LIBOR plus a margin of 2.50 percent to 2.75 percent. The maturity date remains December 14, 2014 with two one-year extension options. Through this amendment, Ares Commercial Real Estate Corporation has increased its total revolving funding facility capacity to $361 million.
“We are very pleased to have increased the Wells Fargo facility, and we greatly appreciate the bank’s support as we expand our platform following the closing of our recent common stock offering,” commented Todd Schuster, Co-Chief Executive Officer of Ares Commercial Real Estate Corporation. “The additional commitment and the enhanced flexibility in the facility should allow us to efficiently leverage the proceeds of our recent capital raise and make new investments with lower funding costs to improve our net returns.”
About Ares Commercial Real Estate Corporation
Ares Commercial Real Estate Corporation is a specialty finance company that originates, invests in and manages middle-market commercial real estate loans and other commercial real estate investments. Through its national direct origination platform, Ares Commercial Real Estate Corporation provides flexible financing solutions for middle market borrowers. Ares Commercial Real Estate Corporation intends to elect to be taxed as a real estate investment trust and is externally managed by an affiliate of Ares Management LLC, a global alternative asset manager with approximately $59 billion in committed capital under management as of March 31, 2013. For more information, please visit our website at arescre.com.
Forward-Looking Statements
Statements included herein may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, which relate to future events or our future performance or financial condition. These statements are not guarantees of future performance, condition or results and involve a number of risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described from time to time in our filings with the Securities and Exchange Commission. Ares Commercial Real Estate undertakes no duty to update any forward-looking statements made herein.
Contact:
Ares Commercial Real Estate Corporation
Carl Drake
(404) 814-5204