SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) June 6, 1996
Prime Retail, Inc.
(Exact name of registrant as specified in its charter)
Maryland 0-23616 52-1836258
(State of other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
100 East Pratt Street
Nineteenth Floor, Baltimore, Maryland 21202
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (410) 234-0782
No Change
(Former name or former address, if changed since last report)
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PRIME RETAIL, INC.
ITEM 5: Other Events
Reference is made to the Press Release dated June 6, 1996 attached
hereto as Exhibit 10.1 and incorporated by reference herein.
ITEM 7: Financial Statements and Exhibits
A. Financial Statements: None
B. Exhibits:
Description Exhibit
Press Release dated June 6, 1996 10.1
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PRIME RETAIL, INC.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
PRIME RETAIL, INC.
(Registrant)
Dated: June 6, 1996
By: /s/ Robert P. Mulreaney
Name: Robert P. Mulreaney
Title: Executive Vice President,
Chief Financial Officer
and Treasurer
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EXHIBIT INDEX
Exhibit
Press Release dated June 6, 1996 10.1
EXHIBIT 10.1
FOR IMMEDIATE RELEASE FOR MORE
INFORMATION
June 6, 1996 Contact: Robert P. Mulreaney
Chief Financial Officer
(410) 234-0782
PRIME RETAIL OBTAINS COMMITMENT FOR $260.0 MILLION OF VARIOUS
DEBT FACILITIES FROM NOMURA ASSET CAPITAL CORPORATION; PRIME
RETAIL INCREASES PROPOSED PUBLIC OFFERING OF COMMON STOCK TO $43.5
MILLION; AND PRIME RETAIL EXTENDS EXPIRATION DATE OF PREFERRED
STOCK EXCHANGE OFFER TO JUNE 24, 1996
BALTIMORE - Prime Retail, Inc. (the "Company") (NASDAQ: PRME, PRMEP) announced
today that it has accepted a loan commitment with Nomura Asset Capital
Corporation ("Nomura") dated June 5, 1996 to provide first and second mortgage
loans to the Company in the aggregate principal amount of $260.0 million (the
"Mortgage Loans"). The Mortgage Loans will be collateralized by thirteen of the
Company s seventeen factory outlet centers. The proceeds will be used (i) to
repay all of the Company s existing indebtedness to Nomura, including
approximately $155.0 million outstanding under an existing credit facility (the
"Credit Facility") and a term loan and approximately $97.0 million outstanding
under a mortgage securitization loan, (ii) to pay loan fees and transaction
costs, including the purchase of interest rate protection contracts, and (iii)
for working capital purposes. The Company expects to close the Mortgage Loans
in July 1996; however, the closing is subject to, among other things, customary
real estate due diligence review by Nomura and completion of appropriate loan
documentation. The Mortgage Loans are in addition to the existing Credit
Facility in the principal amount of $160.0 million which will be available,
subject to certain collateral being pledged to Nomura, for expansions,
acquisitions, and the development of new outlet centers.
The Company also announced today that it intends to increase its previously
announced proposed public offering of Common Stock from 2,610,000 to 3,705,000
shares (the "Stock Offering") and will extend the expiration date of its offer
(the "Exchange Offer") to exchange newly issued shares of Common Stock for up to
4,209,000 shares of its 8.5% Series B Cumulative Participating Convertible
Preferred Stock ("Convertible Preferred Stock") to 5:00 p.m., New York City
Time, on June 24, 1996. Subject to the satisfaction of certain conditions, it
is expected that the Stock Offering will be completed shortly after the closing
of the Exchange Offer. As of the close of business on June 5, 1996, 1,639,143
shares (or 23.4%) of Convertible Preferred Stock had been deposited with the
Exchange Agent for tender in the Exchange Offer. Upon the completion of the
Stock Offering and the Exchange Offer, assuming the maximum permitted exchange
of Common Stock for Convertible Preferred Stock, there will be 13,404,728 shares
of Common Stock of the Company outstanding and 25,266,659 shares of Common Stock
outstanding on a fully-diluted basis.
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"We believe that the loan commitment from Nomura will significantly reduce our
annual debt cost and enhance our financial flexibility when compared to our
present debt facilities and loan commitments, said Michael W. Reschke, Chairman
of the Board of Prime Retail. As a result of the Nomura loan commitment, Prime
Retail expects to reduce its all-in annual debt cost by in excess of $4.0
million based on current interest rates, as compared to the all-in cost of the
Nomura loan commitments signed in December 1995.
We look forward to continuing our long-term relationship with Nomura,
said Abraham Rosenthal, Prime Retail s Chief Executive Officer. Nomura's
commitment demonstrates our Company s ability to access the most cost effective
debt markets, providing significant benefits for our Company and its
shareholders.
The Mortgage Loans are expected to be securitized by Nomura in a REMIC
transaction to close on or before September 30, 1996. Prior to securitization,
the first mortgage loan of $226.5 million will require monthly payments of
interest only at a rate equal to 30-day LIBOR plus 1.31% (inclusive of trustee
and servicing fees). The second mortgage loan of $33.5 million will require
monthly payments of interest only at a rate equal to 30-day LIBOR plus 3.25%.
The Company anticipates that the Mortgage Loans will be securitized into a
senior portion (the "Senior Portion") in an estimated amount of $226.5 million,
rated BBB or better, and a junior portion (the "Junior Portion") in an estimated
amount of $33.5 million rated BB. It is expected that the Senior Portion will
require monthly payments of interest and principal based on a thirty year
amortization of principal and the Junior Portion will require monthly payments
of interest and principal based on the full amortization of principal over a
seven year term. If the actual interest rate spread over 30-day LIBOR deviates
from 1.24% for the Senior Portion, the Company and Nomura will share the risks
or rewards, as the case may be, and the appropriate party will make a payment to
the other based on the present value of such deviation applied against the
principal balance of the Senior Portion. If the securitization does not occur
within six months of the closing of the Mortgage Loans, Nomura may demand
repayment of the Mortgage Loans in full within six months thereafter.
The Company will be required to purchase interest rate protection
agreements for the seven-year term for the principal amount of at least $226.5
million. Based on current interest rate levels, the Company expects its all-in
cost of funds on the Senior Portion of the loan to be approximately 7.5%
(including the estimated annual amortization of the cost of the interest rate
protection contracts).
The Company intends to purchase the Junior Portion and Nomura has agreed to
enter into repurchase agreements (the "Repo Financing") with the Company to
provide the financing for such purchase. The Repo Financing will provide that
monthly payments of interest only be made for a term of two years and will be
recourse to the Company. The Repo Financing will bear interest at a rate of
30-day LIBOR plus 1.95% on fundings up to 75% of the market value of the
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Junior Portion and 30-day LIBOR plus 7% on the fundings over 75% of market value
of the Junior Portion. The Repo Financing will be subject to daily
mark-to-market and margin calls.
Upon terms acceptable to the Company and the rating agencies involved in
the securitization, an amount between $25.0 million to $50.0 million in addition
to the $260.0 million of securitized loans may be raised by the securitization
and, if so, will be held in escrow by Nomura. These funds may be drawn upon by
the Company, subject to the satisfaction of certain objective standards
acceptable to the Company and such rating agencies, for the cost of construction
of expansions at the thirteen mortgaged outlet centers.
The Company expects to incur a non-recurring loss of approximately $10.1
million that will be recorded during the three months ending June 30, 1996.
This loss results from the anticipated termination of the existing December 1995
Nomura loan commitments for which the Company paid $3.3 million. The
non-recurring loss also includes the estimated unamortized cost of certain
interest rate protection contracts of approximately $3.7 million as of July 31,
1996 that will be terminated upon repayment of the debt underlying the
contracts, debt prepayment penalties of $0.8 million and other deferred
financing costs of $4.5 million, less the estimated fair market value of the
interest rate protection contracts of approximately $2.2 million based on their
fair market value as of May 30, 1996. The future fair market value of interest
rate protection contracts is susceptible to valuation fluctuations based on
market changes in interest rates and the maturity date of the underlying
contracts.
Prime Retail is a self-administered, self-managed, real estate investment
trust engaged in the ownership, development, construction, acquisition, leasing,
marketing and management of factory outlet shopping centers. The Company's
outlet center portfolio consists of 17 outlet centers in 14 states, which
totaled approximately 4.3 million square feet of gross leasable area ("GLA")
as of March 31, 1996. In addition, Prime Retail has under construction two new
outlet centers and seven expansions to existing centers which total 787,000
square feet of GLA in the aggregate. Prime Retail has been an owner and
developer of factory outlet centers since 1988.
This announcement is not an offer for the sale of securities. The proposed
underwritten Stock Offering and the Exchange Offer will be made only by means of
a prospectus.
A registration statement relating to the proposed underwritten Stock
Offering has been filed with the Securities and Exchange Commission but has not
yet become effective. An amendment to the registration statement is being filed
today by the Company to disclose, among other things, the items described
herein. This communication shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of such State.
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