Centerline credit agreement waiver amended; non-compliance expected

By Caroline Salls

Pittsburgh, Jan. 17 - Centerline Holding Co. and Centerline Capital Group Inc. entered into a seventh amendment to a non-compliance waiver for their second amended and restated revolving credit and term loan facility with issuing bank and administrative agent Bank of America, NA, according to an 8-K filed Thursday with the Securities and Exchange Commission.

Centerline said the amendment grants a waiver until Feb. 6 of the entities' non-compliance with a consolidated EBITDA-to-fixed-charge ratio covenant for the quarters ended Sept. 30, 2011, March 31, 2012 and Sept. 30. The amendment also grants a waiver until Feb. 6 of non-compliance with a total debt/consolidated EBITDA ratio covenant for the quarters ended June 30, 2012 and Sept. 30.

The amendment also requires the Centerline entities to pay specified costs and expenses incurred by the administrative agent in administering the credit agreement.

Non-compliance consequences

According to the 8-K, Centerline does not expect to be in compliance with the covenants in future periods.

The entities said they would explore any available options for avoiding the consequences of covenant non-compliance, including obtaining additional waivers, working with the lenders to extend, modify or restructure their debt obligations, disposing of assets or adjusting their business.

However, the Centerline entities said they cannot guarantee those efforts would enable it to avoid defaults or acceleration of the obligations or, if implemented, would not involve a substantial restructuring or alteration of their business operations or capital structure.

Centerline said a credit agreement default would result in a cross default under the entities' mortgage banking warehouse facilities, which could eliminate their ability to originate mortgage loans.

The entities said they may file Chapter 11 bankruptcy to preserve enterprise value if a default is declared and the obligations are accelerated.

Centerline is a New York-based provider of real estate finance and asset management services for multifamily housing.

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