First Potomac Realty Trust Announces Delay in Filing Form 10-Q and Reporting First Quarter 2012 Financial Results
BETHESDA, Md.--(BUSINESS WIRE)--First Potomac Realty Trust (NYSE: FPO) today announced that it is delaying the filing of its quarterly report on Form 10-Q for the three months ended March 31, 2012 and the release of its financial results for the same period, and will not host its conference call previously scheduled for May 11, 2012. The Company intends to file a Form 12b-25 with the Securities and Exchange Commission, which will extend the Form 10-Q filing date to May 15, 2012. The Company currently expects to file its Form 10-Q by such date and, if filed by such date, the Form 10-Q will be deemed to be timely filed. The Company will release its financial results for the first quarter in conjunction with the filing of its Form 10-Q and will schedule a conference call to discuss these results at such time.
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. The investigation is being conducted by the Audit Committee of the Board of Trustees, with the assistance of independent outside professionals. The Company is unable to predict the ultimate outcome of the investigation, or the timing of its completion. Giving consideration to the various matters to be addressed in connection with the filing of the Form 10-Q, including those relating to the internal investigation described above and the execution of various waivers and amendments to certain bank debt agreements discussed below, the Company currently expects to file the Form 10-Q within the five calendar-day extension permitted pursuant to Rule 12b-25.
Amendment of Unsecured Revolving Credit Facility, Unsecured Term Loan and Secured Term Loan
As part of the Company’s efforts to remediate the material weakness disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011, the Company has conducted a review of all of the financial and other non-financial covenants contained in its bank debt and senior notes agreements and the processes surrounding the monitoring and oversight of compliance with such covenants. As a result of this review, the Company 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 for the Company to execute its business strategy and clarify the treatment of certain covenant compliance-related definitions. 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 related thereto, that may have existed with respect to periods prior to the date of such amendments.
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, and could either increase future pricing by an additional 25 basis points or revert the pricing to the prior interest rate margin, depending on the Company’s future leverage ratio.
In connection with the foregoing amendments, the Company will pay a fee of 20 basis points on the amount of each of the facilities.
Prepayment of Senior Notes
First Potomac Realty Investment Limited Partnership, the operating partnership of the Company (the “Operating Partnership”), today began the process of prepaying in full the $37.5 million principal amount outstanding of each of its 6.41% Series A Senior Notes and 6.55% Series B Senior Notes, for an aggregate principal amount of $75.0 million, plus accrued interest to the prepayment date and an estimated $10.5 million make-whole amount. The make-whole payment will be recorded as a loss on early debt extinguishment in second quarter of 2012. The Operating Partnership will draw on its unsecured revolving credit facility to finance the prepayment of such notes.
Forward Looking Statements
The forward-looking statements contained in this press release are subject to various risks and uncertainties. Although the Company believes the expectations reflected in such forward-looking statements are based on reasonable assumptions, there can be no assurance that its expectations will be achieved. Certain factors that could cause actual results to differ materially from the Company’s expectations include changes in general or regional economic conditions; the Company’s ability to timely lease or re-lease space at current or anticipated rents; changes in interest rates; changes in operating costs; the Company’s ability to complete acquisitions on acceptable terms; the Company’s ability to manage its current debt levels and repay or refinance its indebtedness upon maturity or other required payment dates; the Company’s ability to maintain financial covenant compliance under its debt agreements; the Company’s ability to remediate the material weakness in its internal controls over financial reporting described in its Annual Report on Form 10-K for the year ended December 31, 2011 and to re-establish and maintain effective internal controls over financial reporting and disclosure controls and procedures; the delay and timing of the filing with the SEC of the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2012 and the consequences thereof; the outcome and potential impact of the ongoing internal investigation, including any remedial actions that may be required as a result of the internal investigation; the Company’s ability to obtain debt and/or financing on attractive terms, or at all; changes in the assumptions underlying the Company’s earnings and FFO guidance and other risks detailed in the Company’s Annual Report on Form 10-K and described from time to time in the Company’s filings with the SEC. Many of these factors are beyond the Company’s ability to control or predict. Forward-looking statements are not guarantees of performance. For forward-looking statements herein, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. The Company assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.