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NHI > SEC Filings for NHI > Form 8-K on 31-Mar-2014All Recent SEC Filings

Show all filings for NATIONAL HEALTH INVESTORS INC

Form 8-K for NATIONAL HEALTH INVESTORS INC


31-Mar-2014

Entry into a Material Definitive Agreement, Creation of a Direct Fi


Item 1.01. Entry into a Material Definitive Agreement

Convertible Senior Notes

On March 28, 2014, National Health Investors, Inc. (the "Company") completed the registered public offering (the "Offering") of $200 million aggregate principal amount of its 3.25% Convertible Senior Notes due 2021 (the "Notes") including the underwriters' exercise in full of their over-allotment option of $25 million aggregate principal amount of the Notes pursuant to an Underwriting Agreement (the "Underwriting Agreement"), dated March 19, 2014, by and between the Company and Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities LLC, as representatives of the several underwriters named therein.

The Notes will bear interest at a rate equal to 3.25% per year, payable semiannually in arrears on April 1 and October 1 of each year, beginning on October 1, 2014. The conversion rate will initially equal 13.9260 shares of common stock per $1,000 principal amount of Notes, which is equivalent to a conversion price of approximately $71.81 per share of common stock, representing an approximate 20% conversion premium based on the closing price of the Company's common stock of $59.84 per share on March 19, 2014. The initial conversion rate is subject to adjustment upon the occurrence of certain events, but will not be adjusted for any accrued and unpaid interest. Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of its common stock or a combination of cash and shares of its common stock, at the Company's election. The Notes will mature on April 1, 2021.

The Company issued the Notes under an Indenture dated March 25, 2014 (the "Base Indenture") by and between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee (the "Trustee") and a First Supplemental Indenture dated March 25, 2014 (the "First Supplemental Indenture") by and between the Company and the Trustee (the Base Indenture, as so amended and supplemented by the First Supplemental Indenture, the "Indenture"). The description herein of the Base Indenture and the First Supplemental Indenture is qualified in its entirety, and the terms therein are incorporated herein, by reference to the Base Indenture and the First Supplemental Indenture filed as Exhibits 4.1 and 4.2, respectively, to this report. The terms of the Notes issued pursuant to the Indenture are described in the section of the Prospectus Supplement relating to the Notes entitled "Description of the Notes," which is incorporated herein by reference.

The Company intends to use the net proceeds of the Offering to reduce amounts outstanding under its revolving credit facility and for general working capital purposes.

Amended Credit Agreement

Effective as of March 27, 2014, the Company entered into that certain Third Amended and Restated Credit Agreement between the Company and the lenders from time to time party thereto, as lenders, Wells Fargo Bank, National Association, as Administrative Agent, Swing Line Lender and Issuing Bank under the Facilities, JPMorgan Chase Bank, N.A., and Bank of America, N.A., each as a Co-Syndication Agent under the Revolving Credit Facility, Key Bank, National Association and Capital One, National Association, each as a Co-Syndication Agent under the Term A-4 Facility, Bank of Montreal (acting under its trade name BMO Capital Markets), Capital One, National Association, Key Bank, National Association, and Regions Bank, each as a Co-Documentation Agent under the Revolving Credit Facility, Wells Fargo Securities, LLC, Bank of Montreal (acting under its trade name BMO Capital Markets),and Key Bank, National Association, each as a Joint Lead Arranger and Joint Bookrunner under the Facilities, Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities, LLC, each as a Joint Lead Arranger and Joint Bookrunner under the Revolving Credit Facility, and Capital One, National Association, as Joint Lead Arranger and Joint Bookrunner under the Term A-4 Facility (the "Amended Credit Agreement"). Any capitalized terms not specifically defined herein shall have the meaning ascribed to them in the Amended Credit Agreement.

The Amended Credit Agreement provides for a $700 million unsecured credit facility that includes a $450 million revolving credit facility, maturing in 2019 (inclusive of an embedded 1-year extension option), a new $130 million term loan, maturing in 2020, and existing $120 million term loans, maturing in 2020. The facility includes an uncommitted incremental facility feature allowing for an additional $130 million of borrowings. At closing, the new facilities replaced smaller credit facilities that originated on June 30, 2013 and provided for $370 million of total commitments. Interest rates are determined with reference to the Company's consolidated leverage ratio, and at the Company's option range from:

for revolving loans, 125-175 basis points over LIBOR, or 25-75 basis points over the highest of the prime rate, the federal funds rate plus 50 basis points, and LIBOR, and

for term loans, 150-200 basis points over LIBOR or 50-100 basis points over the highest of the prime rate, the federal funds rate plus 50 basis points, and LIBOR.


The amended facilities are available to, among other things, fund future acquisitions, and other working capital needs, and general corporate purposes.

The description herein of the Amended Credit Agreement is qualified in its entirety, and the terms therein are incorporated herein by reference to the Amended Credit Agreement which is filed as Exhibit 10.1 to this report and is incorporated herein by reference.



Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

The information required by Item 2.03 relating to the Notes and the Indenture is contained in Item 1.01 above under the section "Convertible Senior Notes" and is incorporated herein by reference.

The information required by Item 2.03 relating to the Amended Credit Agreement is contained in Item 1.01 above under the section "Amended Credit Agreement" and is incorporated herein by reference.



Item 8.01. Other Events

Risk Factors

The Company is filing the below risk factors for the purpose of updating the risk factor disclosure contained in its public filings, including those discussed under the caption "Risk Factors" in its Annual Report on Form 10-K for the fiscal year ended December 31, 2013, which was filed with the Securities and Exchange Commission on February 18, 2014. All references to "we," "our," "us," "the Company" and "NHI" in the following risk factors mean National Health Investors, Inc. and its consolidated subsidiaries, except where it is made clear that the term means only the parent company. Any capitalized terms not specifically defined herein shall have the meaning ascribed to them in the Company's prospectus supplement filed with the Securities and Exchange Commission on March 20, 2014 (the "Prospectus Supplement").

Risks Related to the Notes and to the Offering

We expect that the trading price of the notes will be significantly affected by changes in the market price of our common stock, the interest rate environment and our credit quality, each of which could change substantially at any time.

We expect that the trading price of the notes will depend on a variety of factors, including, without limitation, the market price of our common stock, the interest rate environment and our credit quality. Each of these factors may be volatile, and may or may not be within our control.

For example, the trading price of the notes will increase with the market price and volatility of our common stock. We cannot, however, predict whether the market price of our common stock will rise or fall or whether the volatility of our common stock will continue at its historical level. In addition, general market conditions, including the level of, and fluctuations in, the market price of stocks generally, may affect the market price and the volatility of our common stock. Moreover, we may or may not choose to take actions that could influence the volatility of our common stock.

Likewise, if interest rates, or expected future interest rates, rise during the term of the notes, the yield of the notes will likely decrease, but the value of the convertibility option embedded in the notes will likely increase. Because interest rates and interest rate expectations are influenced by a wide variety of factors, many of which are beyond our control, we cannot assure you that changes in interest rates or interest rate expectations will not adversely affect the trading price of the notes.

Furthermore, the trading price of the notes will likely be significantly affected by any change in our credit quality. Because our credit quality is influenced by a variety of factors, some of which are beyond our control, we cannot guarantee that we will maintain or improve our credit quality during the term of the notes. In addition, because we may choose to take actions that adversely affect our credit quality, such as incurring additional debt, there can be no guarantee that our credit quality will not decline during the term of the notes, which would likely negatively impact the trading price of the notes.

The claims of holders of the notes will be structurally subordinated to claims of creditors of our subsidiaries because our subsidiaries will not guarantee the notes. In addition, we are a parent company that conducts substantially all of its operations through its subsidiaries. Our ability to repay our debt, including the notes, depends on the performance of our subsidiaries which typically own our real estate investments that generate our underlying cash flows and distribute cash flows to us.


Our subsidiaries are separate and distinct legal entities. Our subsidiaries have no obligation to pay any amounts due on the notes. Accordingly, claims of holders of the notes will be structurally subordinated to the claims of creditors and preferred stockholders of these subsidiaries, including trade creditors. As a result, in the event of a bankruptcy, liquidation or reorganization of any of our subsidiaries, such subsidiaries will pay the holders of their debt and their trade creditors before they will be able to distribute any of their assets to us. As of December 31, 2013, the notes would have been structurally subordinated to approximately $80.1 million of indebtedness and other liabilities of our subsidiaries to third parties (excluding trade payables).

Substantially all of our business is conducted through our subsidiaries, which are separate and distinct legal entities. Therefore, our ability to service our indebtedness, including the notes, is dependent on the earnings and the distribution of funds (whether by dividend, distribution or loan) from our subsidiaries. None of our subsidiaries is obligated to make funds available to us for payment on the notes. The ability of our subsidiaries to make funds available to us for payment on the notes is subject to their satisfaction of any senior obligations of the subsidiaries or other restrictions. We cannot assure you that the agreements governing the existing and future indebtedness of our subsidiaries will permit our subsidiaries to provide us with sufficient dividends, distributions or loans to fund payments on the notes when due. In addition, any payment of dividends, distributions or loans to us by our subsidiaries could be subject to restrictions on dividends or repatriation of earnings under applicable local law and monetary transfer restrictions in the jurisdictions in which our subsidiaries operate.

Our substantial indebtedness could adversely affect our business, financial condition or results of operations and prevent us from fulfilling our obligations under the notes.

We currently have and, after this offering, will continue to have a significant amount of indebtedness to lenders who have provided financing for our real estate investments. As of December 31, 2013, our total consolidated indebtedness was approximately $617.1 million (excluding trade payables and unfunded commitments). The existence of indebtedness increases the risk that we may be unable to generate enough cash to pay amounts due in respect of our indebtedness, including the notes.

Our substantial indebtedness could have important consequences to you and significant effects on our business. For example, it could:

make it more difficult for us to satisfy our obligations with respect to the notes;

increase our vulnerability to general adverse economic and industry conditions;

require us to dedicate a significant portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, our strategic growth initiatives and development efforts and other general corporate purposes;

limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;

constrain us from exploiting business opportunities;

place us at a competitive disadvantage compared to those of our competitors that may have less indebtedness; and

limit our ability to borrow additional funds for working capital, capital expenditures, acquisitions, debt service requirements, execution of our business strategy or other general corporate purposes.

In addition, the agreements that govern our current indebtedness contain, and the agreements that may govern any future indebtedness that we may incur may contain, financial and other restrictive covenants that will limit our ability to engage in activities that may be in our long-term best interests. If we failed to comply with those or other covenants, the potential resulting event of default, if not cured or waived, could result in the acceleration of all of our debt.

In the future, we and our subsidiaries may be able to incur substantially more indebtedness. This could further increase the risks associated with having a leveraged balance sheet.

We and our subsidiaries may be able to incur additional indebtedness in the future, including pursuant to a capital markets transaction such as a notes offering as well as secured indebtedness that will be structurally senior to the notes. Furthermore, the Base Indenture (as amended or supplemented) governing the terms of the notes will not limit the amount of debt that we or our subsidiaries may issue or incur. Adding additional indebtedness to current debt levels could make it more difficult for us to satisfy our obligations with respect to the notes. In particular, we are currently seeking to expand our revolving credit facility and negotiate a $125 million term loan, however no assurance can be given that we will be successful in doing so.


Servicing our debt requires a significant amount of cash, and in the future we may not have sufficient cash flow from our business to pay our indebtedness.

Our ability to make scheduled payments of the principal of, to pay interest on or to refinance our indebtedness, including the notes, depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. Our business may not continue to generate cash flow from operations in the future sufficient to service our debt and make necessary capital expenditures. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations.

The notes are not protected by restrictive covenants, which in turn may allow us to engage in a variety of transactions that may impair our ability to fulfill our obligations under the notes.

The Base Indenture (as amended or supplemented) governing the notes will not contain any financial covenants and will not restrict us from paying dividends, incurring debt or issuing or repurchasing our other securities. Because the Base Indenture (as amended or supplemented) will not contain any covenants or other provisions designed to afford holders of the notes protection in the event of a highly leveraged transaction involving us or in the event of a decline in our credit rating for any reason, including as a result of a takeover, recapitalization, highly leveraged transaction or similar restructuring involving us, except to the extent described under the captions "Description of the Notes-Fundamental Change Permits Holders to Require Us to Purchase Notes," . . .



Item 9.01. Financial Statements and Exhibits.

(c) Exhibits.

Exhibit
  No.                                        Title

 4.1         Indenture, dated as of March 25, 2014, between National Health
             Investors, Inc. and The Bank of New York Mellon Trust Company, N.A.,
             as Trustee

 4.2         First Supplemental Indenture, dated as of March 25, 2014, to the
             Indenture, dated as of March 25, 2014, between National Health
             Investors, Inc. and The Bank of New York Mellon Trust Company, N.A.,
             as Trustee

 5.1         Opinion of Locke Lord LLP

 5.2         Opinion of Venable LLP

10.1         Third Amended And Restated Credit Agreement dated as of March 27,
             2014, by and among National Health Investors, Inc., each Lender From
             time to time party thereto, and Wells Fargo Bank, National
             Association, a national banking association, as Administrative Agent,
             the Swing Line Lender and the Issuing Bank

23.1         Consent of Locke Lord LLP (included in Exhibit 5.1 hereto)

23.2         Consent of Venable LLP (included in Exhibit 5.2 hereto)


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