Kilroy Realty Corporation (the "Company”) (NYSE:KRC) today
announced that its Operating Partnership, Kilroy Realty, L.P. (the
"Operating Partnership”), intends to offer, subject to market
conditions, $150.0 million aggregate principal amount of exchangeable
senior unsecured notes due 2014 (the "notes”) in a private placement to
qualified institutional buyers in accordance with Rule 144A under the
Securities Act of 1933, as amended. The notes will be guaranteed by the
Company on a senior unsecured basis. The interest rate, exchange rate
and other terms of the notes will be determined by negotiations between
the Company, the Operating Partnership and the initial purchasers of the
notes. Under certain circumstances, the notes will be exchangeable for
cash up to the principal amount and shares of Company common stock with
respect to any exchange value above the principal amount. The Operating
Partnership will have the right to make an irrevocable election to
satisfy its exchange obligations entirely with shares of Company common
stock. The Operating Partnership expects to grant to the initial
purchasers a 13-day option to purchase up to an additional $22.5 million
aggregate principal amount of notes to cover overallotments, if any.
In connection with the offering of the notes, the Operating Partnership
expects to enter into capped call transactions with affiliates of
certain initial purchasers of the notes (the "option counterparties”).
The capped call transactions are expected generally to reduce the
potential dilution upon exchange of the notes in the event that the
market value per share of Company common stock, as measured under the
terms of the capped call transactions, is greater than the strike price
of the capped call transactions, which corresponds to the initial
exchange price of the notes and is subject to certain adjustments
similar to those contained in the notes. If the initial purchasers
exercise their overallotment option to purchase additional notes, the
Operating Partnership may enter into additional capped call
transactions. In connection with hedging the capped call transactions,
the option counterparties or their affiliates expect to enter into
various derivative transactions with respect to the Company’s common
stock concurrently with or shortly after the pricing of the notes and
may from time to time following the pricing of the notes enter into or
unwind various derivatives and/or purchase or sell the Company’s common
stock in secondary market transactions. These activities could increase
(or reduce the size of any decrease in) the price of the Company’s
common stock concurrently with or following the pricing of the notes and
could also cause or avoid an increase or a decrease in the price of the
Company’s common stock during any observation period related to an
exchange of notes and during the period prior to the maturity date.
After deducting the initial purchasers’ discounts and commissions, the
cost of the capped call transactions and the Company’s estimated
expenses, the Operating Partnership intends to use the remainder of the
net proceeds from the offering of the notes to repay outstanding
long-term debt, including a portion of the borrowings under its
revolving credit facility, and for other general corporate purposes.
This notice does not constitute an offer to sell or a solicitation of an
offer to buy securities, nor shall there be any sale of the notes in any
state or jurisdiction in which such an offer, solicitation or sale would
be unlawful prior to the registration or qualification thereof under the
securities laws of any such state or jurisdiction. Any offers of the
securities will be made only by means of a private offering memorandum.
The notes and any common stock of the Company issuable upon the exchange
of the notes have not been registered under the Securities Act of 1933,
as amended, or the securities laws of any other jurisdiction and may not
be offered or sold absent registration or an applicable exemption from
registration requirements.
Some of the information presented in this release is forward-looking in
nature within the meaning of the Private Securities Litigation Reform
Act of 1995. 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. 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.
