Creative Media & Community Trust Corporation (NASDAQ:CMCT), a real estate investment trust, has announced an amendment to its 2022 credit agreement after an event of default was waived by lenders. The update was disclosed in a recent SEC filing.
On Monday, the company and its lenders entered into the Third Modification Agreement, which waived a default caused by the company's non-compliance with a financial covenant for the quarter ending September 30, 2024. This agreement also reduced the total commitments from $206.23 million to $169.26 million.
Starting April 1, 2025, excess cash flow from the borrowers will be directed into a collateral account controlled by the administrative agent. Borrowers' access to this account will be limited and subject to specific conditions. Furthermore, the agreement adjusts the borrowing base formula and, under certain conditions, allows for the release of assets related to the Sheraton Grand Hotel in Sacramento, California for refinancing.
However, the agreement does not waive compliance with the financial covenant for the quarter ending December 31, 2024, or any subsequent periods.
In other recent news, Creative Media and Community Trust Corporation (CMCT) has made several significant announcements. The company has reported an improvement in net operating income (NOI) across all real estate operating segments for the second quarter of 2024, with the NOI increasing to $16.2 million, up $4.2 million from the previous year.
Despite facing high short-term interest rates and challenges in the office market, CMCT is actively working on strategies to enhance its balance sheet and cash flow, including asset sales and debt reduction.
In addition to these financial developments, CMCT is also making progress on its development projects, with two multifamily projects and a hotel renovation underway. The multifamily segment NOI was driven by occupancy gains, and the lending segment saw a 42% increase due to lower interest expenses. However, the company reported negative FFO per diluted share but raised $8.3 million in net proceeds through preferred stock issuance.
Moreover, the company has announced the redemption of its preferred stock, which will result in the issuance of common stock. The exact number of common stock shares to be distributed is not yet ascertainable as it will be determined by the volume-weighted average price (VWAP) of the common stock over the 20 trading days preceding the redemption date. This transaction is exempt from registration under the Securities Act of 1933, as amended, per Section 3(a)(9) of the Act, allowing for the exchange of securities without the typical registration process.
InvestingPro Insights
Recent InvestingPro data paints a challenging picture for Creative Media & Community Trust Corporation (NASDAQ:CMCT). The company's market capitalization stands at a modest $11.71 million, reflecting significant investor concerns. This is underscored by the stock's poor performance, with a one-year price total return of -86.06% as of the latest data.
Two particularly relevant InvestingPro Tips highlight CMCT's current situation. First, the stock "has fared poorly over the last month," which aligns with the recent credit agreement amendment and default waiver. Second, "liquid assets exceed short term obligations," suggesting that despite its challenges, the company maintains some financial flexibility.
These insights provide context to the credit agreement modifications and the company's efforts to navigate its financial covenants. Investors seeking a deeper understanding of CMCT's financial health and prospects may find value in exploring the additional 10 tips available on InvestingPro.
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