First Potomac Realty amends revolver, term loans to gain flexibility

By Jennifer Chiou

New York, May 10 - First Potomac Realty Trust and its bank lenders have amended the company's $255 million unsecured revolving credit facility, $300 million unsecured term loan and $20 million secured term loan to, among other things, revise certain financial and other covenants to provide additional operating flexibility, according to a news release.

The additional flexibility will allow for First Potomac to execute its business strategy and clarify the treatment of certain covenant compliance-related definitions.

The company announced that it is delaying the filing of its quarterly report on Form 10-Q for the three months ended March 31 as well as its financial results for the same period.

Further, First Potomac will not host its conference call that was previously scheduled for May 11.

As part of the company's efforts to remediate the material weakness disclosed in its 10-K for the year ended Dec. 31, it conducted a review of all of the financial and other non-financial covenants contained in its bank debt and senior notes agreements, the release said.

As a result of the review, it entered into the loan amendments.

In addition, the company has agreed to permit the bank lenders to record mortgages on substantially all of its unencumbered properties. In connection with these amendments, the lenders under those loan agreements have waived all financial covenant non-compliance, if any, and any cross-defaults that may have existed for the periods prior to the date of the amendments, the release stated.

The amendment of the unsecured term loan also converts the facility from a fixed interest rate margin over Libor to a margin that is floating based on the company's leverage ratio, which will increase the current pricing of the unsecured term loan by 25 basis points, the release noted.

This change could either increase future pricing by an additional 25 bps or revert the pricing to the prior interest rate margin, depending on the leverage ratio, First Potomac added.

In connection with the amendments, the company will pay a fee of 20 bps on the amount of each of the facilities.

As previously announced, an internal investigation of the facts and circumstances relating to management's determination of a material weakness in internal control over financial reporting and the company's processes surrounding the monitoring and oversight of compliance with financial covenants is ongoing.

First Potomac is a Bethesda, Md.-based real estate investment trust that focuses on industrial properties and business parks in the Washington, D.C., metropolitan area.

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