KKR units enter into $900 million three-year term lending agreement

By Sarah Lizee

Olympia, Wash., July 1 – KKR Real Estate Finance Trust Inc. subsidiary KREF Lending V LLC entered on Thursday into a $900 million term lending agreement with Morgan Stanley Mortgage Capital Holdings LLC as administrative agent, according to an 8-K filing with the Securities and Exchange Commission.

Proceeds are being used to finance a portfolio of eligible loans that were acquired by KREF on or prior to June 27.

The term lending agreement provides for asset purchases and future advances by the administrative agent on behalf of the buyer of up to $900 million for certain preidentified assets.

The facility was partially drawn on the closing date. Upon the satisfaction of some conditions, it will be drawn on the dates of any future advances and future purchases.

The facility, which is non-mark to market, has an initial maturity date of June 25, 2021, subject to five extension options of one year each, which options may be exercised by KREF upon the satisfaction of some customary conditions.

Advances under the term lending agreement accrue interest at one-month Libor plus a specified margin, which was not disclosed in the filing.

KKR Real Estate Finance Holdings LP, a direct wholly owned subsidiary of KKR Real Estate Finance Trust, is the guarantor.

There are various affirmative and negative covenants including the following financial covenants applicable to the guarantor:

• The ratio of interest income for any four fiscal quarter period to interest expense will not be less than 1.5 to 1.0;

• The ratio of total debt to total assets will not be greater than 75%;

• Cash liquidity will not be less than the greater of $10 million and 5% of the recourse debt of the guarantor; and

• Tangible net worth will not be less than the sum of $880.21 million plus 75% of the aggregate net cash proceeds of any equity issuances made and any capital contributions received by the guarantor after the closing date.

KKR is a New York-based investment firm.

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