Capital Trust restructures credit facilities, exchanges trust preferred securities for notes

By Sara Rosenberg

New York, March 16 - Capital Trust Inc. restructured its credit facilities and issued about 3.5 million warrants to the three secured lenders at a strike price equal to $1.79 per share, according to a news release.

Furthermore, the company exchanged $103.1 million of trust preferred securities for $118.6 of new junior subordinated notes. The notes have a cash interest rate of 1% per annum from March 16 through April 29, 2012. Thereafter, the interest rate reverts to the blended rate (7.23% per annum) in effect prior to the exchange.

Under the restructuring, the credit facilities with JPMorgan, Morgan Stanley and Citigroup saw a change in maturity dates to March 16, 2010, with two one-year extension options.

In addition, existing financial covenants were replaced by new covenants which prohibit most new balance sheet investments, prohibit new debt, prohibit the payout of cash dividends, limit cash compensation to all employees, and require minimum levels of liquidity be maintained.

Also, principal balances were paid down by 3% at closing, 100% of principal payments, 65% of net interest margin from each lender's collateral pool and excess cash above a threshold level will be applied as additional amortization, and cash margin call provisions were eliminated and replaced with pool-wide collateral valuation tests determined on the basis of changes in the performance of the underlying real estate collateral.

The secured credit facility with Goldman Sachs was terminated.

The company also restructured its credit facility with West LB to extend the maturity to March 16, 2010, with two one-year extension options, increase pricing to Libor plus 300 basis points from Libor plus 175 bps, plus an accrual rate of 7.2% per annum less the cash interest rate, pledging the company's unencumbered CDO interests and replacing covenants with ones that are substantially identical to the other facility.

Capital Trust is a New York-based real estate finance and investment management company that specializes in credit sensitive structured financial products.

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