Kilroy Realty Corporation (the "Company”) (NYSE: KRC) today
announced that its Operating Partnership, Kilroy Realty, L.P. (the
"Operating Partnership”), has priced an offering of $150 million
aggregate principal amount of 4.25% exchangeable senior 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 Operating Partnership has granted 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. The notes
will be guaranteed by the Company on a senior unsecured basis.
The notes will pay interest semi-annually at a rate of 4.25% per annum
and mature on November 15, 2014. The notes will have an initial exchange
rate of 27.8307 Company common shares per $1,000 principal amount of the
notes, representing an exchange price of approximately $35.93 per
Company common share and an exchange premium of approximately 17.5%
based on the last reported sale price of $30.58 per Company common share
on November 16, 2009. The initial exchange rate is subject to adjustment
under certain circumstances. The notes will be exchangeable under
certain circumstances 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 has the right to make an
irrevocable election to satisfy its exchange obligations entirely with
shares of Company common stock. The notes will be exchangeable prior to
the close of business on the second business day immediately preceding
the stated maturity date, at any time beginning on August 15, 2014, and
also upon the occurrence of specified events. Closing of the sale of the
notes is expected to occur on November 20, 2009.
In connection with the offering of the notes, the Operating Partnership
has entered into capped call transactions with affiliates of certain
initial purchasers of the notes (the "option counterparties”) in order
to increase the effective exchange price of the notes to approximately
$42.81 per Company common share, which represents an exchange premium of
approximately 40% based on the last reported sale price of $30.58 per
Company common share on November 16, 2009. 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.
Proceeds from the offering are expected to be $150 million, or $172.5
million if the initial purchasers’ overallotment option is exercised in
full, before 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 Kilroy Realty Corporation 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.
