Use these links to rapidly review the document
TABLE OF CONTENTS
Filed Pursuant to Rule 424(b)(3)
Registration No. 333-207647
PROSPECTUS
CyrusOne LP
CyrusOne Finance Corp.
Offer to Exchange
Up to $100,000,000 Principal Amount of
6.375% Senior Notes due 2022
for
a Like Principal Amount of
6.375% Senior Notes due 2022
which have been registered under the Securities Act of 1933
CyrusOne LP and CyrusOne Finance Corp. (the "issuers") are offering to exchange up to $100,000,000 of their outstanding, unregistered 6.375% Senior Notes due 2022 (the "Initial Notes"), for a like principal amount of registered 6.375% Senior Notes due 2022 (the "Exchange Notes"). The Initial Notes and the Exchange Notes are sometimes referred to in this prospectus together as the "Notes," and the transaction to exchange Initial Notes for Exchange Notes is sometimes referred to in this prospectus as the "Exchange Offer" or "this offer." The terms of the Exchange Notes are identical in all material respects to the terms of the Initial Notes, except that the Exchange Notes are registered under the Securities Act of 1933, as amended (the "Securities Act"), and the transfer restrictions, registration rights and related special interest provisions applicable to the Initial Notes do not apply to the Exchange Notes. The Initial Notes may only be tendered in an amount equal to $2,000 in principal amount or in integral multiples of $1,000 in excess thereof. This offer is subject to certain customary conditions and will expire at 5:00 p.m., New York City time, on, December 24, 2015, unless we extend it. The Exchange Notes will not be listed on any securities exchange or any automated dealer quotation system and there is currently no market for the Exchange Notes.
The Initial Notes are, and the Exchange Notes will be, guaranteed (the "guarantees") on a senior basis by CyrusOne Inc., the sole beneficial owner and sole trustee of CyrusOne GP, which is the sole general partner of CyrusOne LP, CyrusOne GP and all of CyrusOne LP's existing domestic subsidiaries (other than CyrusOne Finance Corp. and CyrusOne Government Services LLC). In addition, each of CyrusOne LP's domestic restricted subsidiaries that guarantee any of our other indebtedness or other indebtedness of the guarantors will be required to guarantee the Notes in the future (together with CyrusOne Inc. and all of CyrusOne LP's existing domestic subsidiaries (other than the CyrusOne Finance Corp. and CyrusOne Government Services LLC), the "guarantors"). All references to the Notes include references to the related guarantees.
The Initial Notes are, and the Exchange Notes will be, unsecured senior obligations of the issuers, ranking equal in right of payment with all of the issuers' existing and future unsecured senior debt, including the Existing Notes (as defined below), and senior in right of payment to all of the issuers' future subordinated debt, if any. The Initial Notes are, and the Exchange Notes will be, effectively subordinated to any of the issuers' existing and future secured debt to the extent of the value of the assets securing such debt. The guarantees relating to the Initial Notes are, and the guarantees relating to the Exchange Notes will be, ranked equal in right of payment with all of the guarantors' existing and future unsecured senior debt and senior in right of payment to all of the guarantors' future subordinated debt, if any. The guarantees relating to the Initial Notes are, and the guarantees relating to the Exchange Notes will be, effectively subordinated to any of the guarantors' existing and future secured debt to the extent of the value of the assets securing such debt. In addition, as with the Initial Notes, the Exchange Notes will be structurally subordinated to the liabilities of any non-guarantor subsidiaries.
Both the Existing Notes and the Exchange Notes will be governed by the same indenture, will constitute the same class of securities for the purposes of the indenture and will vote together on all matters. The Initial Notes were issued under a CUSIP number different from the CUSIP number applicable to the Existing Notes. Holders that exchange Initial Notes in the Exchange Offer will receive Exchange Notes that have the same CUSIP number as the Existing Notes and, as a result, the Exchange Notes will be fungible in the trading market with the Existing Notes.
For a more detailed description of the Exchange Notes, see "Description of the Notes."
Each broker-dealer that receives Exchange Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such Exchange Notes. The letter of transmittal states that by so acknowledging and by delivering such a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Notes received in exchange for Initial Notes where such Initial Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. We have agreed that, during the period described in Section 4(a)(3) of the Securities Act and Rule 174 thereunder that is applicable to transactions by brokers or dealers with respect to Exchange Notes, we will use our commercially reasonable efforts to make this prospectus, as amended and supplemented, available to broker-dealers for use in connection with resales of Exchange Notes.
Investing in our securities involves a high degree of risk. See "Risk Factors" beginning on page 11 of this prospectus for a discussion of certain factors you should consider in connection with this Exchange Offer.
We are not asking for a proxy and you are requested not to send us a proxy.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION (THE "SEC") NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is November 23, 2015
You should rely only on the information contained or incorporated by reference in this prospectus. We have not authorized any person to provide you with any information or represent anything about us or this offer that is not contained or incorporated by reference in this prospectus. If given or made, any such other information or representation should not be relied upon as having been authorized by us. You should not assume that the information contained or incorporated by reference in this prospectus is accurate as of any date other than the date on the front of this prospectus or the date of the documents incorporated by reference in this prospectus, as applicable, unless otherwise stated herein, and such information is subject to change, completion or amendment without notice. Our business, financial condition, liquidity, results of operations and prospects may have changed subsequent to such date.
We are not making this offer to, nor will we accept surrenders for exchange from, holders of outstanding Initial Notes in any jurisdiction in which this offer would not be in compliance with the securities or blue sky laws of such jurisdiction or where it is otherwise unlawful.
You should assume that the information appearing in this prospectus is accurate only as of the date on the front cover of this prospectus or the date of the documents incorporated by reference in this prospectus, as applicable, unless otherwise stated herein, and such information is subject to change, completion or amendment without notice. Unless required by applicable law, we assume no obligation to publicly update any of the information contained or incorporated by reference in this prospectus. Neither the delivery of this prospectus at any time, nor the sale of any Notes shall, under any circumstances, create any implication that there has been no change in the information set forth in this prospectus, or in our affairs, since the date of this prospectus. Our business, financial condition, liquidity, results of operations and prospects may have changed since such dates.
This prospectus is based on information provided by us and other sources that we believe are reliable. We cannot assure you that the information from other sources is accurate or complete. We have summarized certain documents and other information in a manner we believe to be accurate, but we refer you to the actual documents for a more complete understanding of what we discuss in this prospectus. In making an investment decision, you must rely on your own examination of our business and the terms of this offer and the Notes, including the merits and risks involved.
This offer is being made on the basis of this prospectus. Any decision to participate in this offer must be based on information contained in this prospectus. You should contact us with any questions about this offer or for additional information to verify the information contained in this prospectus.
You should not consider any information in this prospectus to be legal, business or tax advice. You should consult your own attorney, business advisor and tax advisor for legal, business and tax advice regarding an investment in the Notes.
i
You must comply with all applicable laws and regulations in effect in any applicable jurisdiction, and you must obtain, at your sole cost and expense, any consent, approval or permission required by you for the purchase, offer or sale of the Notes under the laws and regulations in effect in the jurisdictions to which you are subject or in which you make such purchase, offer or sale, and we will not have any responsibility therefor.
Except as otherwise indicated or required by the context, references in this prospectus to (i) "CyrusOne," "we," "our," "us," "the Company" and "our company" refer to CyrusOne Inc., a Maryland corporation, together with its combined subsidiaries, including CyrusOne LP, a Maryland limited partnership (our "operating partnership" or "CyrusOne LP"), and CyrusOne GP, a Maryland statutory trust of which CyrusOne Inc. is the sole beneficial owner and sole trustee and which is the sole general partner of our operating partnership ("CyrusOne GP"), (ii) "CBI" refers to Cincinnati Bell Inc., an Ohio corporation, and, unless the context otherwise requires, its consolidated subsidiaries and (iii) "Cervalis" refers to Cervalis Holdings LLC, a Delaware limited liability company, and, unless the context otherwise requires, it consolidated subsidiary Cervalis LLC, a Delaware limited liability company.
ii
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-4 under the Securities Act with respect to the Exchange Offer. This prospectus, which forms part of the registration statement, does not contain all the information included in the registration statement and the exhibits to the registration statement. For further information about us, the Exchange Offer and the Exchange Notes, you should refer to the registration statement and its exhibits. Copies of our SEC filings, including the exhibits to the registration statement, are available through us or from the SEC through the SEC's website or at its facilities described below.
We are subject to the information and reporting requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and, accordingly, file annual, quarterly and periodic reports, proxy statements and other information with the SEC. You may read and copy any reports, statements or other information we file with the SEC at the Public Reference Room of the SEC, 100 F Street, NE, Washington, D.C. 20549. You may also obtain copies of this information by mail from the Public Reference Room of the SEC, 100 F Street, NE, Washington, D.C. 20549, at prescribed rates, or from commercial document retrieval services. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the Public Reference Room.
Our SEC filings are also available to you, free of charge, on the SEC's website at www.sec.gov. Our SEC filings are also be available through the "CompanySEC Filings" tab of CyrusOne Inc.'s website at www.cyrusone.com. The information contained on or linked to or from our website is not incorporated by reference into this prospectus and is not considered part of this prospectus.
We "incorporate by reference" certain information into this prospectus from certain documents that we filed with the SEC prior to the date of this prospectus. By incorporating by reference, we are disclosing important information to you by referring you to documents we have filed separately with the SEC. The information incorporated by reference is deemed to be part of this prospectus, except for information incorporated by reference that is modified or superseded by information contained in this prospectus or in any other subsequently filed document that also is incorporated by reference herein. Any statement so modified or superseded will not be deemed, except as so modified or superseded, to be part of this prospectus. These documents contain important information about us, our business and our finances. The following documents previously filed with the SEC are incorporated by reference into this prospectus except for any document or portion thereof deemed to be "furnished" and not filed in accordance with SEC rules:
We also incorporate by reference all documents we may file with the SEC pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act on or after the date of this prospectus and prior to the termination of the offering of securities covered by this prospectus, except for any document or
iii
portion thereof deemed to be "furnished" and not filed in accordance with SEC rules. The information relating to us contained in this prospectus does not purport to be comprehensive and should be read together with the information contained in the documents incorporated or deemed to be incorporated by reference herein.
The financial information relating to Cervalis incorporated by reference herein as of and for the years ended December 31, 2014, 2013 and 2012, as filed on our Current Report on Form 8-K, dated June 22, 2015, was audited on a basis compliant with the standards promulgated by the American Institute of Certified Public Accountants, but not with the standards promulgated by the Public Company Accounting Oversight Board. We believe that this does not have a material impact on the understanding of Cervalis' results of operations, financial condition, liquidity and related operating and financial trends.
If you request, either orally or in writing, we will provide you with a copy of any or all documents that are incorporated by reference herein. Such documents will be provided to you free of charge, but will not contain any exhibits, unless those exhibits are incorporated by reference into the document. Requests can be made by writing to Investor Relations at 1649 West Frankford Road, Carrollton, Texas 75007 or by phone at (972) 350-0060. To obtain timely delivery of any requested information, holders of Initial Notes must make any request no later than five business days prior to the expiration of the Exchange Offer. The documents may also be accessed on our website under the "CompanySEC Filings" tab at www.cyrusone.com. Information contained on our website is not incorporated by reference into this prospectus and is not considered part of this prospectus.
iv
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus and the documents incorporated by reference herein contain forward-looking statements within the meaning of the federal securities laws. In particular, statements pertaining to our capital resources, portfolio performance and results of operations contain forward-looking statements. Likewise, our pro forma financial statements incorporated by reference herein and all of our statements regarding anticipated growth in our funds from operations and anticipated market conditions, demographics and results of operations are forward-looking statements. You can identify forward-looking statements by the use of forward-looking terminology such as "believes," "expects," "may," "will," "should," "seeks," "approximately," "intends," "plans," "pro forma," "estimates" or "anticipates" or the negative of these words and phrases or similar words or phrases that are predictions of or indicate future events or trends and that do not relate solely to historical matters. You can also identify forward-looking statements by discussions of strategy, plans or intentions.
Forward-looking statements involve numerous risks and uncertainties and you should not rely on them as predictions of future events. Forward-looking statements depend on assumptions, data or methods that may be incorrect or imprecise and we may not be able to realize them. The following factors, among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements:
v
While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. We disclaim any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors of new information, data or methods, future events or other changes. For a further discussion of these and other factors that could impact our future results, performance or transactions, see "Risk Factors," including the risks incorporated herein from our most recent Annual Report on Form 10-K filed with the SEC on February 27, 2015, as updated by our subsequent filings.
vi
The following summary contains information about us and the Exchange Offer. It does not contain all of the information that may be important to you in making a decision to participate in the Exchange Offer. For a more complete understanding of us and the Exchange Notes, we urge you to read this entire prospectus and the documents incorporated by reference herein carefully, including the "Risk Factors" section and the financial statements and the notes to those statements incorporated by reference herein. See "Where You Can Find More Information" and "Incorporation by Reference" in this prospectus.
Our Company
We are an owner, operator and developer of enterprise-class, carrier-neutral, multi-tenant data center properties. Our enterprise-class, carrier-neutral, multi-tenant data centers have redundant power, cooling and access to a range of telecommunications carriers. They are not network-specific and enable customer interconnectivity to a range of telecommunications carriers. We provide mission-critical data center facilities that protect and ensure the continued operation of information technology ("IT") infrastructure for 929 customers in 31 operating data centers and two recovery centers in 12 distinct markets (10 cities in the U.S., London and Singapore) as of September 30, 2015. We provide twenty-four-hours-a-day, seven-days-a-week security guard monitoring with customizable security features.
1
Our Structure
The following diagram depicts our ownership structure as of September 30, 2015, after giving effect to the Exchange Offer:
2
The Cervalis Acquisition
On July 1, 2015, our operating partnership completed its acquisition of Cervalis Holdings LLC, a Delaware limited liability company ("Cervalis") for approximately $400.0 million, excluding transaction related expenses and subject to customary purchase price adjustments. As a result of the acquisition of Cervalis (the "Cervalis Acquisition"), Cervalis is a wholly owned subsidiary of CyrusOne LP and we acquired four Tier 3+ data center facilities and two work area recovery facilities (the "Cervalis Facilities") serving the New York metropolitan area.
The Cervalis Facilities currently comprise more than 500,000 gross square feet of space, including more than 120,000 CSF and over 100,000 square feet of work area recovery space. In the year ended December 31, 2014 and in the six months ended June 30, 2015 (the last year-to-date interim period for which the statements of operations of Cervalis are available), Cervalis generated revenues of approximately $69.0 million and $39.5 million, respectively, with approximately two-thirds of such revenues being derived from colocation services and the remainder from interconnection, managed services and work area recovery products. As of September 30, 2015, 87% of the CSF within the Cervalis Facilities was utilized.
The Cervalis Acquisition is expected to provide additional benefits to us, including the following:
Corporate Information
We have elected to be treated as a REIT for U.S. federal income tax purposes. Our principal executive offices are located at 1649 West Frankford Road, Carrollton, Texas 75007. Our telephone number is (972) 350-0060.
3
Summary of the Terms of the Exchange Offer
Background |
On July 1, 2015, we completed a private placement of $100,000,000 of our 6.375% Senior Notes due 2022. In connection with this private placement, we entered into a registration rights agreement in which we agreed, among other things, to complete this Exchange Offer. | |
The Exchange Offer |
We are offering to exchange the unregistered Initial Notes for a like principal amount of 6.375% Senior Notes due 2022, which have been registered under the Securities Act. The Initial Notes may only be tendered in an amount equal to $2,000 in principal amount or in integral multiples of $1,000 in excess thereof. See "The Exchange OfferTerms of the Exchange Offer." |
|
|
In order to exchange the Initial Notes, you must follow the required procedures, and we must accept the Initial Notes for exchange. We will exchange all Initial Notes validly tendered and not validly withdrawn prior to the expiration date. See "The Exchange Offer." |
|
Resale of Exchange Notes |
Based on interpretations of the SEC staff, as described in previous no-action letters, we believe that Exchange Notes issued pursuant to the Exchange Offer in exchange for Initial Notes may be offered for resale, resold and otherwise transferred without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that: |
|
|
you are acquiring the Exchange Notes issued in this offer in the ordinary course of your business; |
|
|
you have not engaged in, do not intend to engage in, and have no arrangement or understanding with any person to participate in a distribution, (within the meaning of the Securities Act) of the Exchange Notes to be issued in the Exchange Offer; and |
|
|
you are not an "affiliate" of ours, as defined in Rule 405 of the Securities Act. |
|
|
By tendering your Initial Notes as described in "The Exchange OfferProcedures for Tendering," you will be making representations to this effect. If you fail to satisfy any of these conditions, you cannot rely on the position of the SEC set forth in the no-action letters referred to above and you must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a resale of the Exchange Notes. |
|
|
We base our belief on interpretations by the SEC staff in no-action letters issued to other issuers in exchange offers like ours. We cannot guarantee that the SEC would make a similar decision about our Exchange Offer. If our belief is wrong, you could incur liability under the Securities Act. We will not protect you against any loss incurred as a result of this liability under the Securities Act. |
4
|
Each broker-dealer that receives Exchange Notes for its own account in exchange for Initial Notes, where such Initial Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any offer to resell, resale or other transfer of Exchange Notes in the Exchange Offer. See "Plan of Distribution." |
|
Consequences If You Do Not Exchange Your Initial Notes |
Initial Notes that are not tendered in the Exchange Offer or are not accepted for exchange will continue to bear legends restricting their transfer. You will not be able to offer or sell such Initial Notes unless you are able to rely on an exemption from the requirements of the Securities Act or the Initial Notes are registered under the Securities Act. |
|
|
After the Exchange Offer is completed, we will no longer have an obligation to register the Initial Notes, except under limited circumstances. To the extent that Initial Notes are tendered and accepted in the Exchange Offer, the market for any remaining Initial Notes will be adversely affected. See "Risk FactorsRisks Relating to the Notes and the Exchange OfferAny Initial Notes that are not exchanged will continue to be restricted securities and may become less liquid." |
|
Expiration Date |
The Exchange Offer expires at 5:00 p.m., New York City time, on December 24, 2015, unless we extend such Exchange Offer. See "The Exchange OfferExpiration Date; Extensions; Amendments." |
|
Issuance of Exchange Notes |
We will issue Exchange Notes in exchange for Initial Notes tendered and accepted in the Exchange Offer promptly following the expiration date (unless amended as described in this prospectus). See "The Exchange OfferTerms of the Exchange Offer." |
|
Conditions to the Exchange Offer |
The Exchange Offer is subject to certain customary conditions, which we may amend or waive. The Exchange Offer is not conditioned upon any minimum principal amount of outstanding Initial Notes being tendered. See "The Exchange OfferConditions to the Exchange Offer." |
|
Procedures for Tendering Initial Notes |
To participate in the Exchange Offer, you must (i) complete, sign and date the accompanying letter of transmittal, or a facsimile copy of such letter, in accordance with its instructions and the instructions of this prospectus, and (ii) mail or otherwise deliver the executed letter of transmittal, together with the Initial Notes and any other required documentation to the exchange agent at the address set forth in the letter of transmittal. If you are a broker, dealer, commercial bank, trust company or other nominee and you hold Initial Notes through the Depository Trust Company ("DTC"), and wish to accept this offer, you must do so pursuant to DTC's automated tender offer program. See "The Exchange OfferProcedures for Tendering." |
5
Special Procedures for Beneficial Holders |
If you beneficially own Initial Notes which are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and you wish to tender in the Exchange Offer, you should contact the registered holder promptly and instruct such person to tender on your behalf. If you wish to tender in this offer on your own behalf, you must, prior to completing and executing the letter of transmittal and delivering your Initial Notes, either arrange to have the Initial Notes registered in your name or obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take a considerable amount of time. See "The Exchange OfferProcedures for Tendering." |
|
Withdrawal Rights |
You may withdraw your tender of Initial Notes at any time before the expiration date for this offer. See "The Exchange OfferWithdrawal of Tenders." |
|
Regulatory Requirements |
We do not believe that the receipt of any material federal or state regulatory approval will be necessary in connection with either Exchange Offer, other than the notice of effectiveness under the Securities Act of the registration statement pursuant to which the Exchange Offer is being made. |
|
Accounting Treatment |
We will not recognize any gain or loss for accounting purposes upon the completion of the Exchange Offer. The expenses of the Exchange Offer that we pay will increase our deferred financing costs in accordance with accounting principles generally accepted in the United States ("GAAP"). See "The Exchange OfferAccounting Treatment." |
|
Federal Income Tax Consequences |
The exchange of Initial Notes for Exchange Notes pursuant to the Exchange Offer generally will not be a taxable event for U.S. federal income tax purposes. See "Material United States Federal Income Tax Considerations." |
|
Use of Proceeds |
We will not receive any cash proceeds from the exchange or issuance of Exchange Notes in connection with the Exchange Offer. |
|
Exchange Agent |
Wells Fargo Bank, N.A. is serving as exchange agent in connection with the Exchange Offer. The address and telephone number of the exchange agent are set forth under "The Exchange OfferExchange Agent." Wells Fargo Bank, N.A. is also the trustee under the indenture governing the Notes. |
6
Summary of the Terms of the Exchange Notes
Unless specifically indicated, the summary below describes the principal terms of the Notes (including the Exchange Notes). This summary is not intended to be complete. For a more complete understanding of the Notes, please refer to the section entitled "Description of the Notes" in this prospectus. Other than the restrictions on transfer, registration rights and special interest provisions, the Exchange Notes will have the same financial terms and covenants in all material respects as the Initial Notes, which are summarized as follows:
Issuers |
CyrusOne LP and CyrusOne Finance Corp. | |
Notes offered |
$100,000,000 in aggregate principal amount of 6.375% Senior Notes due 2022. The Initial Notes constitute an additional issuance of 6.375% Notes due 2022 pursuant to our indenture, dated as of November 20, 2012, as supplemented, under which $525,000,000 of 6.375% Senior Notes due 2022 were issued on November 20, 2012 (the "Existing Notes"). The Exchange Notes are identical in all material respects to the terms of the Initial Notes, except for the original date of issuance, the date from which interest will initially begin to accrue, that the Exchange Notes are registered under the Securities Act and that the transfer restrictions, registration rights and related special interest provisions applicable to the Initial Notes do not apply to the Exchange Notes. The Exchange Notes will evidence the same debt as the Initial Notes, and both the Initial Notes and the Exchange Notes will be governed by the same indenture. |
|
|
The Exchange Notes are identical in all material respects to the terms of the Existing Notes, except for the original date of issuance, issue price and the date from which interest will initially begin to accrue. Both the Existing Notes and the Exchange Notes will be governed by the same indenture, will constitute the same class of securities for the purposes of the indenture and will vote together on all matters. The Initial Notes were issued under a CUSIP number different from the CUSIP number applicable to the Existing Notes. Holders that exchange Initial Notes in the Exchange Offer will receive Exchange Notes that have the same CUSIP number as the Existing Notes and, as a result, the Exchange Notes will be fungible in the trading market with the Existing Notes. |
|
Maturity date |
November 15, 2022. |
|
Interest |
The Notes bear interest at a rate of 6.375% per year, payable semi-annually in cash on May 15 and November 15 of each year. Interest on the Exchange Notes will accrue from the most recent date to which interest on the Initial Notes has been paid, or if no interest has been paid on the Initial Notes, from May 15, 2015. The next interest payment date on the Initial Notes is May 15, 2016. |
7
Guarantees |
The Notes are fully, jointly and severally and unconditionally guaranteed on a senior basis by CyrusOne, the sole beneficial owner and sole trustee of CyrusOne GP, which is the sole general partner of our operating partnership and will also be a guarantor of the Exchange Notes, and all of CyrusOne LP's existing domestic subsidiaries (other than CyrusOne Finance Corp. and CyrusOne Government Services LLC). Each of the guarantors under the Notes also guarantees the credit agreement governing our senior unsecured revolving credit facility and senior unsecured term loan facility (the "Credit Agreement"). Each domestic subsidiary that guarantees indebtedness of CyrusOne LP or any guarantor in the future will also guarantee the Notes. | |
Ranking |
The Notes are: |
|
|
senior unsecured obligations of the issuers; |
|
|
pari passu in right of payment with any existing and future unsecured senior indebtedness of the issuers (including the Existing Notes); |
|
|
senior in right of payment to any future subordinated indebtedness of the issuers, if any; |
|
|
effectively subordinated in right of payment to all existing and future secured indebtedness of the issuers to the extent of the value of the collateral securing such indebtedness; and |
|
|
structurally subordinated in right of payment to all indebtedness and other liabilities, including trade payables, of our operating partnership's non-guarantor subsidiaries. |
|
|
Each guarantee is: |
|
|
a senior unsecured obligation of such guarantor; |
|
|
pari passu in right of payment with any existing and future senior unsecured indebtedness of such guarantor; |
|
|
senior in right of payment to any future subordinated indebtedness of such guarantor, if any; and |
|
|
effectively subordinated in right of payment to all secured indebtedness of such guarantor, to the extent of the value of the collateral securing such indebtedness. |
8
|
As of September 30, 2015, we had $992.6 million principal amount of debt outstanding, including $474.8 million principal amount of Notes, $205.0 million under our revolving credit facility, $300.0 million under our term loan facility and $12.8 million of capital leases. In addition, we had $151.9 million of other financing arrangements. All of our outstanding indebtedness is unsecured other than our capital leases. As of September 30, 2015, we had the ability to borrow up to an additional $437.9 million under our revolving credit facility (not giving effect to the unused portion of the accordion feature in the Credit Agreement, for which we do not have commitments), net of outstanding letters of credit of approximately $7.1 million, subject to satisfying certain financial tests. |
|
|
The non-guarantor subsidiaries generated less than 2% of our combined revenues for both the year ended December 31, 2014 and the nine months ended September 30, 2015 and held approximately $41.7 million, or 2%, of our combined assets and approximately $40.1 million, or 3%, of our combined liabilities as of September 30, 2015. |
|
Optional redemption |
Prior to November 15, 2017, the issuers may redeem the Notes, in whole or in part, at any time at a redemption price equal to 100% of the principal amount of the Notes, plus accrued and unpaid interest to the redemption date, plus the applicable "make-whole" premium set forth in this prospectus. The issuers may redeem the Notes, in whole or in part, at any time on or after November 15, 2017, at a redemption price equal to 100% of the principal amount of the Notes, plus accrued and unpaid interest to the redemption date, plus a premium declining over time as set forth in this prospectus. See "Description of the NotesOptional Redemption." |
|
Change of control |
If a "Change of Control" occurs, noteholders may require the issuers to repurchase all or part of their Notes at 101% of the principal amount of the Notes, plus accrued and unpaid interest to the repurchase date. The term "Change of Control" is defined under "Description of the NotesCertain Definitions." |
9
Certain covenants |
The indenture governing the Notes contains covenants that, among other things, limit our operating partnership's ability and the ability of its restricted subsidiaries to: | |
|
incur secured or unsecured indebtedness; |
|
|
pay dividends or distributions on its equity interests, or redeem or repurchase equity interests of CyrusOne or CyrusOne LP; |
|
|
make certain investments or other restricted payments; |
|
|
enter into transactions with affiliates; |
|
|
enter into agreements limiting the ability of CyrusOne LP's restricted subsidiaries to pay dividends or make certain transfers and other payments to CyrusOne LP or to other restricted subsidiaries; |
|
|
sell assets; and |
|
|
merge, consolidate or transfer all or substantially all of their assets. |
|
|
CyrusOne LP and its restricted subsidiaries are also required to maintain total unencumbered assets of at least 150% of their unsecured debt on a consolidated basis. |
|
|
These covenants contain important exceptions, limitations and qualifications. For so long as the Notes are rated investment grade by each of Moody's Investors Service, Inc. ("Moody's") and Standard & Poor's Ratings Services ("S&P"), certain covenants will be suspended with respect to the Notes and the subsidiary guarantees will be released. For more details, see "Description of the Notes." |
|
Activities of CyrusOne, CyrusOne GP and CyrusOne Finance Corp. |
The indenture governing the Notes restricts the activities of CyrusOne, CyrusOne GP and CyrusOne Finance Corp. See "Description of the NotesCovenantsLimitation on Activities of Holdings and CyrusOne GP" and "Description of the NotesCovenantsLimitation on Activities of Finance Corp." |
|
No public trading market |
The Exchange Notes will not be listed on any national securities exchange or any automated dealer quotation system. As a result, an active trading market for the Exchange Notes may not develop or be sustained. If an active trading market does not develop, the market price and liquidity of the Exchange Notes may be adversely affected. See "Risk FactorsRisks Related to the Notes and the Exchange Offer." |
|
Governing law |
The indenture, the Notes and the guarantees are and will be governed by the laws of the state of New York. |
|
Risk factors |
Investing in the Notes involves a high degree of risk. See "Risk Factors" and all other information included or incorporated by reference into this prospectus (including the "Risk Factors" under Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2014, incorporated by reference herein) for a discussion of the factors you should carefully consider before deciding to participate in the Exchange Offer or invest in the Notes. |
10
In considering whether to participate in this Exchange Offer, you should carefully consider all of the information we have included or incorporated by reference in this prospectus. In particular, you should carefully consider the risk factors incorporated by reference from our most recent Annual Report on Form 10-K, the risks discussed below and the other information contained in this prospectus and the documents we incorporate by reference herein before making a decision to participate in this Exchange Offer. Any or all of these risks could have a material adverse effect on our businesses, reputation, financial condition, results of operations and cash flows, the trading price of the Notes and our ability to make payments on the Notes. Some statements in this prospectus, including statements in the following risk factors, constitute forward-looking statements. Please refer to the section entitled "Special Note Regarding Forward-Looking Statements."
Risks Related to the Notes and the Exchange Offer
We have significant outstanding indebtedness that involves significant debt service obligations, limits our operational and financial flexibility, exposes us to interest rate fluctuations and exposes us to the risk of default under our debt obligations.
As of September 30, 2015, we had $992.6 million principal amount of debt outstanding, including $474.8 million principal amount of Notes, $205.0 million under our revolving credit facility, $300.0 million under our term loan facility and $12.8 million of capital leases. In addition, we had $151.9 million of other financing arrangements. All of our outstanding indebtedness is unsecured other than our capital leases. As of September 30, 2015, we had the ability to borrow up to an additional $437.9 million under our revolving credit facility (not giving effect to the unused portion of the accordion feature in the Credit Agreement, for which we do not have commitments), net of outstanding letters of credit of approximately $7.1 million, subject to satisfying certain financial tests. As of September 30, 2015, the Credit Agreement contained an accordion feature that allowed our operating partnership to request an increase in the total commitment by up to $250.0 million. There are no limits on the amount of indebtedness we may incur other than limits contained in the indenture governing the Notes, the Credit Agreement or future agreements that we may enter into or as may be set forth in any policy limiting the amount of indebtedness we may incur adopted by CyrusOne's board of directors. A substantial level of indebtedness could have adverse consequences for our business, financial condition and results of operations because it could, among other things:
11
Despite our current indebtedness levels, we may still be able to incur substantially more debt, including secured debt. This could exacerbate further the risks associated with our substantial leverage.
We may be able to incur substantial additional indebtedness in the future, including debt under the Credit Agreement and future credit facilities, some or all of which may be secured and therefore would rank effectively senior to the Notes. As of September 30, 2015, we had $437.9 million of availability under the Credit Agreement, net of outstanding letters of credit of approximately $7.1 million, and the Credit Agreement's accordion feature allowed our operating partnership to request an increase in the total commitment by up to an additional $250.0 million. While the indenture governing the Notes has certain restrictions on the incurrence of additional debt by our operating partnership and its restricted subsidiaries, it does not entirely prohibit any additional incurrence and has no restrictions on CyrusOne's ability to incur indebtedness directly. The indenture governing the Notes also allows our operating partnership and its restricted subsidiaries to incur certain secured debt which would be effectively senior to the Notes. In addition, the indenture does not prevent our operating partnership or its restricted subsidiaries from incurring other liabilities that do not constitute indebtedness. See "Description of the Notes." If new debt or other liabilities are added to our current debt levels, the related risks that we now face could intensify.
As with the Existing Notes, the Notes and the related guarantees are unsecured and are and will continue to be effectively junior in right of payment to any secured indebtedness of the issuers or the guarantors.
As with the Existing Notes, the Notes and the related guarantees are the issuers' and the guarantors' unsecured senior obligations. The Notes and the guarantees are and will continue to be effectively junior in right of payment to all of the issuers' and all of the guarantors' existing and future secured debt, to the extent of the value of the assets securing such obligations. As of September 30, 2015, we had $992.6 million principal amount of debt outstanding, including $474.8 million principal amount of Notes, $205.0 million under our revolving credit facility, $300.0 million under our term loan facility and $12.8 million of capital leases. In addition, we had $151.9 million of other financing arrangements. All of our outstanding indebtedness is unsecured other than our capital leases. As of September 30, 2015, we had the ability to borrow up to an additional $437.9 million under our revolving credit facility (not giving effect to the unused portion of the accordion feature in the Credit Agreement, for which we do not have commitments), net of outstanding letters of credit of approximately $7.1 million, subject to satisfying certain financial tests. Under the terms of the indenture governing the Notes, subject to satisfaction of certain other requirements, our operating partnership and its restricted subsidiaries may incur additional debt secured by their respective assets. For a discussion of our operating partnership's ability to incur such secured debt, see "Description of the NotesCovenantsLimitation on Indebtedness." Because the Notes are unsecured obligations, your right of repayment may be compromised if:
12
If any of these events occur, any secured lenders could foreclose on the assets of the issuers or the guarantors in which they have been granted a security interest, in each case to your exclusion, even if an event of default exists under the indenture governing the Notes at such time. As a result, upon the occurrence of any of these events, it is possible that there would be no assets remaining from which your claims could be satisfied or, if any assets remained, they might be insufficient to fully satisfy your claims. You may therefore not be fully repaid if the issuers or the guarantors become insolvent or otherwise fail to make payment on the Notes.
As with the Existing Notes, the Notes are and will continue to be structurally junior in right of payment to the liabilities of any of the issuers' non-guarantor subsidiaries.
Only CyrusOne, CyrusOne GP and all of our operating partnership's existing domestic subsidiaries (other than CyrusOne Finance Corp. and CyrusOne Government Services LLC) guarantee the Notes. In addition, any new domestic subsidiary of our operating partnership will not be required to guarantee the issuers' obligations under the Notes if it does not guarantee any other debt of CyrusOne, our operating partnership or any other subsidiary guarantor. As with the Existing Notes, the Notes are and will continue to be structurally junior in right of payment to the indebtedness and other liabilities of the issuers' non-guarantor subsidiaries. These non-guarantor subsidiaries are separate and distinct legal entities and have no obligation, contingent or otherwise, to pay any amounts due pursuant to the Notes, or to make any funds available therefor, whether by dividends, loans, distributions or other payments. Any right that the issuers or the subsidiary guarantors have to receive any assets of any of the non-guarantor subsidiaries upon the bankruptcy, liquidation or reorganization of those subsidiaries, and the consequent rights of holders of Notes to realize proceeds from the sale of any of such non-guarantor subsidiaries' assets, will be structurally subordinated to the claims of such non-guarantor subsidiaries' creditors, including trade creditors, mortgage holders and holders of preferred equity interests of those subsidiaries. Accordingly, in the event of a bankruptcy, liquidation or reorganization of any of our non-guarantor subsidiaries, these non-guarantors subsidiaries will pay the holders of their debts, holders of preferred equity interests and their trade creditors before distributing any of their assets to us. The non-guarantor subsidiaries generated less than 2% of our combined revenues for both the year ended December 31, 2014 and the nine months ended September 30, 2015 and held approximately $41.7 million, or 2%, of our combined assets and approximately $40.1 million, or 3%, of our combined liabilities as of September 30, 2015.
The agreements governing our indebtedness place restrictions on us, reducing our operational flexibility and creating default risks.
The agreements governing our indebtedness contain covenants that place restrictions on us and our subsidiaries. These covenants restrict, among other things, our and our subsidiaries' ability to:
13
These covenants could impair our ability to grow our business, take advantage of attractive business opportunities or successfully compete. In addition, the Credit Agreement requires us to maintain specified financial metrics and satisfy financial condition tests. The indenture governing the Notes also requires our operating partnership and its subsidiaries to maintain total unencumbered assets of at least 150% of the aggregate principal amount of their outstanding unsecured indebtedness on a consolidated basis. Our ability to comply with these metrics or tests may be affected by events beyond our control, including prevailing economic, financial and industry conditions. A breach of any of these covenants or covenants under any other agreements governing our indebtedness could result in an event of default. Cross-default provisions in our debt agreements could cause an event of default under one debt agreement to trigger an event of default under our other debt agreements. Upon the occurrence of an event of default under any of our debt agreements, the lenders or holders thereof could elect to declare all outstanding debt under such agreements to be immediately due and payable. If we were unable to repay or refinance the accelerated debt, the lenders or holders, as applicable, could proceed against any assets pledged to secure that debt, including foreclosing on or requiring the sale of our data centers, and our assets may not be sufficient to repay such debt in full. For a detailed description of the covenants and restrictions imposed by the indenture governing the Notes, see "Description of the Notes."
The documents that govern our outstanding indebtedness require that we maintain certain financial metrics and, if we fail to do so, we will be in default under the applicable debt instrument, which in turn could trigger defaults under our other debt instruments, which could result in the maturities of all of our debt obligations being accelerated.
Each of our significant debt instruments requires that we maintain certain financial metrics. The Credit Agreement provides that the total indebtedness of our operating partnership and its subsidiaries shall not exceed 60% of the gross value of the assets of our operating partnership and its subsidiaries, determined based on the capitalized value of the stabilized properties of our operating partnership and its subsidiaries for the preceding fiscal quarter multiplied by four, the book value of the stabilized properties acquired by our operating partnership and its subsidiaries during the four fiscal quarters most recently ended, the book value of development properties owned by our operating partnership and its subsidiaries, unrestricted cash and cash equivalents held by our operating partnership and its subsidiaries, the book value of land assets held by our operating partnership and its subsidiaries and the book value of mortgage notes held by our operating partnership and its subsidiaries. The Credit Agreement also requires that our operating partnership maintain a minimum EBITDA to fixed charges ratio of not less than 1.70 to 1.00 and a minimum consolidated net worth of $1.347 billion, plus 80% of the sum of the net proceeds from any equity offerings by us, our operating partnership and its subsidiaries and the value of any equity issued upon the contribution of assets to our operating partnership or its subsidiaries after October 9, 2014.
In addition, the indenture that governs the Notes requires that our operating partnership and its restricted subsidiaries maintain total unencumbered assets of at least 150% of the aggregate principal amount of all of their outstanding unsecured indebtedness on a consolidated basis.
If we do not continue to satisfy these covenant metrics, we will be in default under the applicable debt instrument, which in turn would trigger defaults under our other debt instruments, which could result in the maturities of all of our debt obligations being accelerated. These events would have a material adverse effect on our liquidity.
14
Certain exceptions under the indenture permit our operating partnership and its restricted subsidiaries to make distributions to maintain the REIT status of CyrusOne even when they cannot otherwise make restricted payments under the indenture.
Under the indenture, our operating partnership and its restricted subsidiaries are allowed to make restricted payments only if, at the time they make such a restricted payment, our operating partnership is able to incur at least $1.00 of indebtedness under certain provisions of the "Limitation on Indebtedness" covenant, including that our operating partnership has a consolidated EBITDA to consolidated interest expense coverage ratio of at least 2.0 to 1.0 and its indebtedness is not greater than 60% of adjusted total assets. For a more complete discussion of the restricted payment and debt incurrence covenants of the indenture applicable to the Notes, see "Description of the NotesCovenantsLimitation on Restricted Payments" and "Description of the NotesCovenantsLimitation on Indebtedness."
Even when our operating partnership and its restricted subsidiaries are unable to make restricted payments during a period in which they are unable to incur $1.00 of indebtedness, so long as no default or event of default under the indenture shall have occurred and be continuing, the indenture permits our operating partnership and its restricted subsidiaries to declare or pay any dividend or make any distribution to their equity holders to fund a dividend or distribution by them, so long as CyrusOne believes in good faith that it qualifies as a REIT under the Code, and the declaration or payment of any such dividend or the making of any such distribution is necessary either to maintain CyrusOne's status as a REIT under the Code for any calendar year or to enable CyrusOne to avoid payment of any tax for any calendar year that could be avoided by reason of a distribution by CyrusOne to its shareholders, with such distribution to be made as and when determined by CyrusOne, whether during or after the end of the relevant calendar year.
We may not have the ability to raise the funds necessary to finance the change of control offer required by the indenture.
Upon the occurrence of certain change of control events, we will be required to offer to repurchase the Notes at 101% of the principal amount thereof, plus accrued and unpaid interest to the date of repurchase. However, it is possible that we will not have sufficient funds at the time of the change of control to make the required repurchase of the Notes, especially if the change of control also constitutes a change of control under the Credit Agreement. Under the Credit Agreement, a change of control constitutes an event of default, which could result in our obligation to repay any outstanding borrowings under the Credit Agreement and repurchase the Notes at the same time. Our failure to repay or repurchase the Notes would constitute an event of default under the indenture.
An active trading market may not develop for the Exchange Notes.
The failure of a market developing for the Exchange Notes could affect the liquidity and value of the Exchange Notes and you may not be able to sell the Exchange Notes readily, or at all, or at or above the price that you paid.
As with the Existing Notes and the Initial Notes, we do not intend to apply for the listing of the Exchange Notes on any national securities exchange or any automated dealer quotation system. As a result, an active trading market for the Exchange Notes may not develop or be sustained. The initial purchasers in the offering of the Initial Notes have advised us that, as of the issue date of the Initial Notes, they intended to make a market in the Initial Notes. However, the initial purchasers are not obligated to make a market in the Initial Notes, and one or more initial purchasers may cease any market-making in the Notes at any time. We cannot assure you that any market for the Exchange Notes will develop, or if one does develop, that it will be liquid. If the Exchange Notes are traded, they may trade at a discount from their initial offering price, depending on prevailing interest rates, the
15
market for similar securities, our credit rating, our operating performance and financial condition and other factors. If an active trading market does not develop, the market price and liquidity of the Exchange Notes may be adversely affected. As a result, we cannot assure you that you will be able to sell any of the Exchange Notes at a particular time, at attractive prices, or at all. Thus, you may be required to bear the financial risk of your investment in the Exchange Notes indefinitely.
The trading prices of the Notes will be directly affected by our credit rating.
The Initial Notes are and the Exchange Notes will be publicly rated by Moody's, S&P and other independent rating agencies. A security rating is not a recommendation to buy, sell or hold securities. These public debt ratings may affect our ability to raise debt. Any future downgrading of the Notes by Moody's and S&P or another rating agency may affect the cost and terms and conditions of our financings and could adversely affect the value and trading price of the Notes.
Credit rating agencies continually revise their ratings for companies that they follow, including us. Any ratings downgrade could adversely affect the trading price of the Notes or the trading market for the Notes to the extent a trading market for the Notes develops.
Federal and state statutes allow courts, under specific circumstances, to void guarantees and require noteholders to return payments received from guarantors.
If a bankruptcy case or lawsuit is initiated by unpaid creditors of any guarantor, the debt represented by the guarantees entered into by the guarantor may be reviewed under the federal bankruptcy law and comparable provisions of state fraudulent transfer laws. Under these laws, a guarantee could be voided, or claims in respect of the guarantee could be subordinated to certain obligations of a guarantor if, among other things, the guarantor, at the time it entered into the guarantee, received less than reasonably equivalent value or fair consideration for entering into the guarantee and was one of the following:
In addition, any payment by a guarantor could be voided and required to be returned to the guarantor or to a fund for the benefit of the guarantor's creditors under those circumstances.
If a guarantee of a subsidiary were voided as a fraudulent conveyance or held unenforceable for any other reason, holders of the Notes would be solely creditors of CyrusOne, CyrusOne GP, the issuers and creditors of our operating partnership's subsidiaries that have validly guaranteed the Notes. The Notes then would be structurally subordinated to all liabilities of the subsidiary whose guarantee was voided.
The measures of insolvency for purposes of these fraudulent transfer laws will vary depending upon the law applied in any proceeding to determine whether a fraudulent transfer has occurred. Generally, however, a guarantor would be considered insolvent if:
16
The indenture requires that future domestic subsidiaries of our operating partnership guarantee the Notes under certain circumstances. These considerations will also apply to those guarantees.
Any Initial Notes that are not exchanged will continue to be restricted securities and may become less liquid.
Initial Notes that are not tendered or that we do not accept for exchange will, following this offer, continue to be restricted securities, and the holder may not offer to sell them except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. We will issue Exchange Notes in exchange for the Initial Notes pursuant to this offer only following the satisfaction of the procedures and conditions set forth in "The Exchange OfferConditions to the Exchange Offer" and "The Exchange OfferProcedures for Tendering." Such procedures and conditions include timely receipt by the exchange agent of such Initial Notes (or a confirmation of book entry transfer) and of a properly completed and duly executed letter of transmittal (or an agent's message from DTC). Because we anticipate that most holders of Initial Notes will elect to exchange their Initial Notes for Exchange Notes, we expect that the liquidity of the market for the Initial Notes remaining after the completion of the Exchange Offer will be substantially limited. Any Initial Notes tendered and exchanged in this offer will reduce the aggregate principal amount of Initial Notes outstanding. Following the Exchange Offer, Initial Notes generally will not have any further registration rights, and such Initial Notes will continue to be subject to certain transfer restrictions. Accordingly, the liquidity of the market for the Initial Notes could be adversely affected.
The ability of a broker-dealer to transfer the Exchange Notes may be restricted.
A broker-dealer that acquired the Initial Notes for its own account as a result of market-making activities or other trading activities must comply with the prospectus delivery requirements of the Securities Act in connection with any resale of the Exchange Notes. Our obligation to make this prospectus available to broker-dealers is limited. Consequently, we cannot guarantee that a proper prospectus will be available to broker-dealers wishing to resell their Exchange Notes.
Risks Related to the Cervalis Acquisition
The Cervalis Acquisition may not achieve its intended benefits or may disrupt our plans and operations.
There can be no assurance that we will be able to successfully integrate Cervalis with our business or otherwise realize the expected benefits of the Cervalis Acquisition. Our ability to realize the anticipated benefits of the Cervalis Acquisition will depend, to a large extent, on our ability to integrate Cervalis with our business. The combination of two independent businesses is a complex, costly and time-consuming process. Our business may be negatively impacted by the Cervalis Acquisition if we are unable to effectively manage our expanded operations. The integration process requires significant time and focus from our management team and may divert attention from the day-to-day operations of the combined business. Additionally, the continued integration of Cervalis could disrupt our current plans and operations, which could delay the achievement of our strategic objectives.
The expected synergies and operating efficiencies of the Cervalis Acquisition may not be fully realized, which could result in increased costs and have a material adverse effect on our business, financial condition, results of operations and/or cash flows. In addition, the overall integration of the businesses may result in material unanticipated problems, expenses, liabilities, competitive responses, loss of customer relationships and diversion of management's attention, among other potential adverse consequences. The risks of combining our operations of the businesses include, among others:
17
Many of these risks will be outside of our control and any one of them could result in increased costs, decreases in the amount of expected revenue, and diversion of our management's time and energy, which could have a material adverse effect on our business, financial condition, results of operations and/or cash flows. In addition, even if our operations are integrated successfully with Cervalis', we may not realize the full benefits of the Cervalis Acquisition, including the synergies, operating efficiencies, or sales or growth opportunities that are expected. These benefits may not be achieved within the anticipated time frame or at all.
We may be subject to unknown or contingent liabilities related to Cervalis for which we may have limited recourse against the sellers.
Cervalis may be subject to unknown or contingent liabilities for which we may have limited recourse against the sellers. Unknown or contingent liabilities might include liabilities for clean-up or remediation of environmental conditions, claims of customers, vendors or other persons dealing with the acquired entities, tax liabilities and other liabilities whether incurred in the ordinary course of business or otherwise. While the sellers are required to indemnify us with respect to breaches of representations and warranties, such indemnification is somewhat limited and subject to various survival periods, materiality thresholds, a deductible of $2.0 million and an aggregate cap on losses, with minimal exceptions, of $4.0 million.
As a result, there can be no assurance that we will recover all amounts with respect to losses due to breaches of Cervalis' representations and warranties. In addition, the total amount of costs and expenses that we may incur with respect to liabilities associated with Cervalis may exceed our expectations, which may adversely affect our business, financial condition and results of operations.
The unaudited pro forma condensed combined financial information incorporated by reference into this prospectus is presented for illustrative purposes only and is not necessarily indicative of what our financial position, operating results and other data would have been if the Cervalis Acquisition had actually been completed on the dates indicated and is not intended to project such information for any future date or for any future period, as applicable.
The unaudited pro forma condensed combined financial information incorporated by reference into this prospectus that give effect to the Cervalis Acquisition is based on numerous assumptions and estimates underlying the adjustments described in the accompanying notes, which are based on available information and assumptions that our management considers reasonable. In addition, such unaudited pro forma condensed combined financial information does not reflect adjustments for other developments with our business or Cervalis' business after September 30, 2015. As a result, the unaudited pro forma condensed combined financial information does not purport to represent our financial condition that would have actually occurred had the Cervalis Acquisition occurred on September 30, 2015, represent the results of our operations that would have actually occurred had the Cervalis Acquisition occurred on January 1, 2014 or project our financial position or results of operations as of any future date or for any future period, as applicable.
18
RATIO OF EARNINGS TO COMBINED FIXED CHARGES FOR CYRUSONE INC.
AND CYRUSONE LP
|
Successor | Predecessor | ||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(dollars in millions)
|
Nine Months Ended, September 30, 2015 |
Year Ended December 31, 2014(a) |
January 24 to December 31, 2013(a) |
January 1, 2013 to January 23, 2013(b) |
Year Ended December 31, 2012(b) |
Year Ended December 31, 2011(b) |
Year Ended December 31, 2010(b) |
|||||||||||||||
Pre-tax income (loss) from continuing operations before adjustment for noncontrolling interests/minority interests in consolidated subsidiaries or income or loss from equity investees plus fixed charges* |
$ | 15.2 | $ | 30.0 | $ | 30.8 | $ | (16.8 | ) | 19.9 | 39.4 | 19.2 | ||||||||||
Fixed charges: |
||||||||||||||||||||||
Interest expensed and capitalized |
33.4 | 44.1 | 42.8 | 2.6 | 44.5 | 35.5 | 12 | |||||||||||||||
Appropriate portion of rentals(c) |
1.8 | 2.2 | 2.2 | 0.5 | 2.9 | 2.4 | 1.2 | |||||||||||||||
Total fixed charges |
35.2 | 46.3 | 45.0 | 3.1 | 47.4 | 37.9 | 13.2 | |||||||||||||||
Ratio of earnings to fixed charges(d)(e)(f)(g)(h) |
| | | | | 1.0 | 1.5 |
19
This Exchange Offer is intended to satisfy our obligations under the registration rights agreement entered into in connection with the issuance of the Initial Notes. We will not receive any cash proceeds from the issuance of the Exchange Notes in connection with this Exchange Offer.
In consideration for issuing the Exchange Notes as contemplated by this prospectus, we will receive the Initial Notes in a like principal amount. The Initial Notes surrendered and exchanged for the Exchange Notes will be retired and canceled and cannot be reissued.
20
You can find the definitions of certain terms used in this description under the subheading "Certain Definitions." In this description, "CyrusOne" refers only to CyrusOne LP, and not to any of its Subsidiaries nor to Holdings or any of its Subsidiaries; the term "Finance Corp." refers to CyrusOne Finance Corp., a wholly-owned Subsidiary of CyrusOne LP with nominal assets which conducts no operations; the term "Issuers" refers to CyrusOne and Finance Corp.; "CyrusOne GP" refers to CyrusOne GP, the general partner of CyrusOne; and "Holdings" refers to CyrusOne, Inc., the 100% owner of CyrusOne GP, and not to any of its Subsidiaries.
On November 20, 2012, the Issuers issued $525.0 million aggregate principal amount of 6.375% Senior Notes due 2022 (the "Existing Notes") under the indenture (as amended or supplemented, the "indenture") dated as of November 20, 2012, among the Issuers, the Guarantors and Wells Fargo Bank, N.A., as trustee (the "Trustee"). On July 1, 2015, the Issuers issued $100.0 million aggregate principal amount of 6.375% Senior Notes due 2022 (the "Initial Notes") under the indenture in a private transaction that was not subject to the registration requirements of the Securities Act. As of the date of this prospectus, $374.8 million of the Existing Notes and $100.0 million of the Initial Notes are outstanding. Unless otherwise expressly stated or the context otherwise requires, references to the "notes" in this "Description of the Notes" means the Existing Notes, the Initial Notes, the Exchange Notes and any other Additional Notes the Issuers may issue in the future pursuant to the terms of the indenture.
The Exchange Notes are identical in all material respects to the terms of the Existing Notes, except for the original date of issuance, issue price and the date from which interest will initially begin to accrue. The Exchange Notes are identical in all material respects to the terms of the Initial Notes, except for the original date of issuance, the date from which interest will initially begin to accrue, that the Exchange Notes are registered under the Securities Act, and the transfer restrictions, registration rights and related special interest provisions applicable to the Initial Notes do not apply to the Exchange Notes. The Exchange Notes will evidence the same debt as the Initial Notes, and both the Initial Notes and the Exchange Notes will be governed by the indenture. The Exchange Notes will rank pari passu in right of payment with the Existing Notes and the holders of the Exchange Notes will vote together with the holders of the Existing Notes on any matter submitted to a vote of the holders of the notes under the indenture.
The Initial Notes were issued under a CUSIP number different from the CUSIP number applicable to the Existing Notes. Holders that exchange Initial Notes in the Exchange Offer will receive Exchange Notes that have the same CUSIP number as the Existing Notes and, as a result, the Exchange Notes will be fungible in the trading market with the Existing Notes.
As of the date of this prospectus, there is $474.8 million aggregate principal amount of outstanding notes. Accordingly, if all of the Initial Notes are exchanged for Exchange Notes, the Exchange Notes will constitute 21.1% of the total voting power of the notes issued under the indenture that will be outstanding upon completion of this offer.
The terms of the notes include those stated in the indenture and those made part of the indenture by reference to the Trust Indenture Act of 1939, as amended.
The following description is a summary of the material provisions of the indenture. It does not restate the indenture in its entirety. We urge you to read the indenture because it, and not this description, defines your rights as holders of the notes. Copies of the indenture are available as set forth below under "Additional Information." Certain defined terms used in this description but not defined below under "Certain Definitions" have the meanings assigned to them in the indenture.
The registered holder of a note is treated as the owner of it for all purposes. Only registered holders have rights under the indenture.
21
Brief Description of the Notes and the Note Guarantees
The Notes. As with the Existing Notes and the Initial Notes, the Exchange Notes will be:
Finance Corp. currently has no obligations other than the notes and its Guarantee in respect of CyrusOne's credit agreement.
The Note Guarantees. As with the Existing Notes and the Initial Notes, the Exchange Notes will be guaranteed on a joint and several basis by Holdings, CyrusOne GP, all of CyrusOne's existing domestic Restricted Subsidiaries (other than Finance Corp., CyrusOne Government Services LLC and any Receivables Entity) and all of CyrusOne's future Restricted Subsidiaries that are or become required to issue Note Guarantees pursuant to the covenant described below under the caption "CovenantsLimitation on Issuances of Guarantees by Restricted Subsidiaries."
The Note Guarantee of each Guarantor is and will be:
Not all of CyrusOne's Subsidiaries guarantee the notes. In the event of a bankruptcy, liquidation or reorganization of any of these non-guarantor Subsidiaries, the non-guarantor 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. The non-guarantor Subsidiaries generated less than 2% of our combined revenues for both the year ended December 31, 2014 and the nine months ended September 30, 2015, and held approximately $41.7 million, or 2%, of our combined assets and approximately $40.1 million, or 3%, of our combined liabilities as of September 30, 2015.
As of the date of this offer, all of our Subsidiaries are "Restricted Subsidiaries." However, under the circumstances described in the definition of "Unrestricted Subsidiaries," we are permitted to designate certain of our Subsidiaries as "Unrestricted Subsidiaries." Our Unrestricted Subsidiaries are not subject to many of the restrictive covenants in the indenture. Our Unrestricted Subsidiaries do not guarantee the notes.
Each Note Guarantee is limited to the maximum amount that would not render the Guarantor's obligations subject to avoidance under applicable fraudulent conveyance provisions of the United States Bankruptcy Code or any comparable provision of state law. By virtue of this limitation, a Guarantor's
22
obligation under its Note Guarantee could be significantly less than amounts payable with respect to the notes, or a Guarantor may have effectively no obligation under its Note Guarantee. See "Risk FactorsRisks Related to the Notes and the Exchange OfferFederal and state statutes allow courts, under specific circumstances, to void guarantees and require noteholders to return payments received from guarantors."
Each Guarantor that makes a payment under its Note Guarantee is and will be entitled upon payment in full of all guaranteed obligations under the indenture to a contribution from each other Guarantor in an amount equal to such other Guarantor's pro rata portion of such payment based on the respective net assets of all the Guarantors at the time of such payment determined in accordance with GAAP.
The Note Guarantee of a Subsidiary Guarantor will automatically terminate and be released upon:
In addition, if on any date following the Original Issue Date the notes are rated Investment Grade by both Rating Agencies and no Default or Event of Default shall have occurred and be continuing under the indenture, then, beginning on that date, the Subsidiary Guarantors will be automatically released from their obligations under the Note Guarantees; provided, however, that following a Reinstatement Date, each of the Restricted Subsidiaries who would have been required to Guarantee the notes but for the foregoing will be required to execute and deliver a supplemental indenture to the indenture providing for a Note Guarantee by such Restricted Subsidiary.
Finance Corp.
Finance Corp. is a Maryland corporation and a wholly-owned Subsidiary of CyrusOne that was formed for the purpose of facilitating the offering of the Existing Notes by acting as co-issuer. Finance Corp. is nominally capitalized and does not have any operations or revenues. As a result, holders and prospective purchasers of the notes should not expect Finance Corp. to participate in servicing the interest and principal obligations on the notes. See "CovenantsLimitation on Activities of Finance Corp."
Principal, Maturity and Interest
The Issuers issued $100.0 million in aggregate principal amount of Initial Notes. The Issuers will exchange up to $100.0 million of Initial Notes for a like principal amount of Exchange Notes in the Exchange Offer. The Issuers may issue Additional Notes under the indenture from time to time after the issuance of the Initial Notes. Any issuance of Additional Notes is subject to all of the covenants in the indenture, including the covenant described below under the caption "CovenantsLimitation on
23
Indebtedness." The notes and any Additional Notes subsequently issued under the indenture will be treated as a single class for all purposes under the indenture, including, without limitation, waivers, amendments, redemptions and offers to purchase. The Issuers issued the Initial Notes and will issue the Exchange Notes in minimum denominations of $2,000 and integral multiples of $1,000 in excess of $2,000. The notes will mature on November 15, 2022.
Interest on the notes accrues at the rate of 6.375% per annum and is payable semi-annually in arrears on May 15 and November 15, commencing on May 15, 2016 in the case of the Exchange Notes. The Issuers will make each interest payment to the holders of record on the immediately preceding May 1 and November 1.
Interest on the Exchange Notes will accrue from the most recent date to which interest on the Initial Notes has been paid, or if no interest has been paid on the Initial Notes, from May 15, 2015. Interest is computed on the basis of a 360-day year comprised of twelve 30-day months.
Methods of Receiving Payments on the Notes
The notes are payable as to principal, premium, if any, and interest at the office or agency of the paying agent and registrar within the City and State of New York, or, at the option of the Issuers, payment of interest may be made by check mailed to the holders at their addresses set forth in the register of holders; provided that payment by wire transfer of immediately available funds is required with respect to principal of, premium on, if any, and interest on, all global notes and all other notes the holders who have provided wire transfer instructions to the Issuers or the paying agent to an account in the United States of America.
Paying Agent and Registrar for the Notes
The Trustee is the current paying agent and registrar. CyrusOne may change the paying agent or registrar without prior notice to the holders of the notes, and CyrusOne or any of its Subsidiaries may act as paying agent or registrar.
Transfer and Exchange
A holder may transfer or exchange notes in accordance with the provisions of the indenture. The registrar and CyrusOne may require a holder, among other things, to furnish appropriate endorsements and transfer documents in connection with a transfer of notes. Holders will be required to pay all taxes due on transfer. CyrusOne will not be required to transfer or exchange any note selected for redemption. Also, CyrusOne will not be required to transfer or exchange any note for a period of 15 days before a selection of notes to be redeemed.
Optional Redemption
At any time prior to November 15, 2015, the Issuers may on any one or more occasions redeem up to 35% of the aggregate principal amount of notes issued under the indenture (including Additional Notes, if any), upon not less than 30 nor more than 60 days' notice to the holders (with a copy to the Trustee), at a redemption price equal to 106.375% of the principal amount of the notes redeemed, plus accrued and unpaid interest, if any, to the date of redemption (subject to the rights of holders of notes on any relevant record date occurring prior to the applicable redemption date to receive interest on the relevant interest payment date), with an amount of cash equal to the net cash proceeds of an Equity Offering; provided that:
24
At any time prior to November 15, 2017, the Issuers may on any one or more occasions redeem all or a part of the notes, upon not less than 30 nor more than 60 days' notice to the holders (with a copy to the Trustee), at a redemption price equal to 100% of the principal amount of the notes redeemed, plus the Applicable Premium as of, and accrued and unpaid interest, if any, to the date of redemption (subject to the rights of holders of notes on any relevant record date occurring prior to the applicable redemption date to receive interest due on the relevant interest payment date).
Except pursuant to the preceding paragraphs, the notes will not be redeemable at the Issuers' option prior to November 15, 2017.
On or after November 15, 2017, the Issuers may on any one or more occasions redeem all or a part of the notes, upon not less than 30 nor more than 60 days' notice to the holders (with a copy to the Trustee), at the redemption prices (expressed as percentages of principal amount) set forth below, plus accrued and unpaid interest, if any, on the notes redeemed, to the applicable date of redemption, if redeemed during the twelve-month period beginning on November 15 of the years indicated below (subject to the rights of holders of notes on any relevant record date occurring prior to the applicable redemption date to receive interest on the relevant interest payment date):
Year
|
Redemption Price |
|||
---|---|---|---|---|
2017 |
103.188 | % | ||
2018 |
102.125 | % | ||
2019 |
101.063 | % | ||
2020 and thereafter |
100 | % |
Unless the Issuers default in the payment of the redemption price, interest will cease to accrue on the notes or portions thereof called for redemption on the applicable redemption date.
Selection and Notice of Redemption
If less than all of the notes are to be redeemed at any time, the Trustee will select notes for redemption on a pro rata basis (or, in the case of notes issued in global form as discussed under "Book-Entry, Delivery and Form," based on a method that most nearly approximates a pro rata selection as the Trustee deems fair and appropriate) unless otherwise required by law or applicable stock exchange or depositary requirements.
No notes of $2,000 or less can be redeemed in part. Notices of redemption will be mailed by first class mail at least 30 but not more than 60 days before the redemption date to each holder of notes to be redeemed at its registered address, except that redemption notices may be mailed more than 60 days prior to a redemption date if the notice is issued in connection with a defeasance of the notes or a satisfaction and discharge of the indenture. Any redemption may, at CyrusOne's option, be subject to the satisfaction of one or more conditions precedent.
If any note is to be redeemed in part only, the notice of redemption that relates to that note will state the portion of the principal amount of that note that is to be redeemed. A new note in principal amount equal to the unredeemed portion of the original note will be issued in the name of the holder of notes upon cancellation of the original note. Notes called for redemption become due on the date fixed for redemption. On and after the redemption date, interest ceases to accrue on notes or portions of notes called for redemption.
25
Mandatory Redemption; Sinking Fund
The Issuers are not required to make any mandatory redemption or sinking fund payments for the notes.
Suspension of Covenants
For so long as (i) the notes are rated Investment Grade by each of S&P and Moody's (or, if either (or both) of S&P and Moody's have been replaced in accordance with the definition of "Rating Agencies," by each of the then applicable Rating Agencies) and (ii) no Default has occurred and is continuing under the indenture, CyrusOne and its Restricted Subsidiaries will not be subject to the covenants in the indenture specifically listed under the following captions in this "Description of the Notes" section of this prospectus (collectively, the "Suspended Covenants"):
Additionally, during such time as the above referenced covenants are suspended, (i) the Note Guarantees of the Subsidiary Guarantors will also be suspended (the "Suspended Guarantees") and (ii) CyrusOne will not be permitted to designate any Restricted Subsidiary as an Unrestricted Subsidiary unless CyrusOne would have been permitted to designate such Subsidiary as an Unrestricted Subsidiary if the Suspended Covenants had been in effect for such period.
If at any time the notes' credit rating is downgraded from an Investment Grade rating by either of the Rating Agencies, then the Suspended Covenants and the Suspended Guarantees will thereafter be reinstated as if such covenants and guarantees had never been suspended (the "Reinstatement Date") and will be applicable pursuant to the terms of the indenture (including in connection with performing any calculation or assessment to determine compliance with the terms of the indenture), unless and until the notes subsequently attain an Investment Grade rating from both the Rating Agencies (in which event the Suspended Covenants and the Suspended Guarantees will no longer be in effect for such time that the notes maintain an Investment Grade rating); provided, however, that no Default, Event of Default or breach of any kind will be deemed to exist under the indenture, the notes or the Note Guarantees with respect to the Suspended Covenants or the Suspended Guarantees based on any actions taken or events occurring during the Suspension Period referred to below, or any actions taken at any time pursuant to any contractual obligation arising prior to the Reinstatement Date, regardless of whether such actions or events would have been permitted if the applicable Suspended Covenants or the Suspended Guarantees remained in effect during such period. The period of time between (i) the date of suspension of the Suspended Covenants and the Suspended Guarantees and (ii) the Reinstatement Date, if any, is referred to as the "Suspension Period." On the Reinstatement Date, all Indebtedness incurred during the Suspension Period will be classified as having been Incurred in compliance with clauses (1), (2) and (3) of the covenant described below under the caption "CovenantsLimitation on Indebtedness." To the extent such Indebtedness would not be so
26
permitted to be Incurred in compliance with clauses (1), (2) and (3) of the covenant described below under the caption "CovenantsLimitation on Indebtedness," such Indebtedness will be classified as having been Incurred pursuant to clause (4)(D) of that covenant. Calculations made after the Reinstatement Date of the amount available to be made as Restricted Payments pursuant to the covenant described below under "CovenantsLimitation on Restricted Payments" will be made as though such covenant had been in effect since the Original Issue Date and throughout the Suspension Period. Accordingly, Restricted Payments made during the Suspension Period will reduce the amount available to be made as Restricted Payments under the first paragraph of the covenant described below under "CovenantsLimitation on Restricted Payments," to the extent set forth in such covenant. For purposes of determining compliance with the covenant described below under the caption "CovenantsLimitation on Asset Sales," the amount of Excess Proceeds will be deemed to be zero as of the Reinstatement Date.
There can be no assurance that the notes will ever achieve or maintain a rating of Investment Grade from any Rating Agency.
Covenants
The indenture contains, among others, the following covenants.
Limitation on Indebtedness
27
that any event which results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any subsequent transfer of such Indebtedness (other than to CyrusOne or any other Restricted Subsidiary) will be deemed, in each case, to constitute an Incurrence of such Indebtedness not permitted by this clause (B)(ii);
28
29
that complies within this covenant. Indebtedness under the Credit Agreement outstanding on the Original Issue Date will initially be deemed to have been incurred on such date in reliance on the exception provided by clause (4)(A) of this covenant.
Maintenance of Total Unencumbered Assets
CyrusOne and its Restricted Subsidiaries will maintain at all times Total Unencumbered Assets of not less than 150% of the aggregate principal amount of all outstanding Unsecured Indebtedness.
Limitation on Sale and Leaseback Transactions
CyrusOne will not, and will not permit any of its Restricted Subsidiaries to, enter into any Sale and Leaseback Transaction with respect to any property or asset unless:
Limitation on Restricted Payments
CyrusOne will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly:
30
principal installment or financial maturity, in each case due within one year of the date of such purchase, repurchase, redemption, defeasance or other acquisition or retirement); or
As of September 30, 2015, the amount available for Restricted Payments under clause (C) of paragraph (4) above was approximately $732.7 million.
Notwithstanding the foregoing, CyrusOne and any of its Restricted Subsidiaries may declare or pay any dividend or make any distribution to their equity holders to fund a dividend or distribution by Holdings (and make any corresponding distributions to CyrusOne's partners other than Holdings), so long as (A) Holdings believes in good faith that Holdings qualifies as a real estate investment trust
31
under the Code and the declaration or payment of such dividend, in each case, by Holdings, or the making of such distribution is necessary either to maintain Holdings' status as a real estate investment trust under the Code for any calendar year or to enable Holdings to avoid payment of any tax for any calendar year that could be avoided by reason of a distribution by Holdings to its shareholders, with such distribution by Holdings to be made as and when determined by Holdings, whether during or after the end of the relevant calendar year, and (B) no Default or Event of Default shall have occurred and be continuing.
The foregoing provisions will not be violated by reason of:
32
any other direct or indirect parent company of CyrusOne) to provide Holdings (or any such parent company) with the cash necessary to make such payments;
33
share of such amounts relating to Holdings (or other direct or indirect parent company) being a public company; and (d) fees and expenses other than to Affiliates of CyrusOne related to any successful or unsuccessful financing transaction or equity offering;
Each Restricted Payment permitted pursuant to this paragraph (other than the Restricted Payments referred to in clauses (2), (3), (4), (5), (6), (7), (9), (10), (11), (12), (13), (14), (15), (16) and (17) of this paragraph) will be included in calculating whether the conditions of clause (C) of the first paragraph of this covenant have been met with respect to any subsequent Restricted Payments and any net cash proceeds utilized to effect a Restricted Payment pursuant to clause (3) of this paragraph will be excluded.
Limitation on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries
CyrusOne will not, and will not permit any of its Restricted Subsidiaries to, create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction of any kind on the ability of any Restricted Subsidiary to:
The foregoing provisions will not restrict any encumbrances or restrictions:
34
a whole, to the holders than those encumbrances or restrictions that are being extended, refinanced, renewed or replaced;
35
Nothing contained in this covenant will prevent CyrusOne or any of its Restricted Subsidiaries from restricting the sale or other disposition of property or assets of CyrusOne or its Restricted Subsidiaries that secure Indebtedness of CyrusOne or any of its Restricted Subsidiaries.
Limitation on Issuances of Guarantees by Restricted Subsidiaries
CyrusOne will not permit any of its Restricted Subsidiaries to Guarantee, directly or indirectly, any Indebtedness of Holdings, CyrusOne or any Subsidiary Guarantor ("Guaranteed Indebtedness"), unless, if such Restricted Subsidiary is not already a Subsidiary Guarantor, such Restricted Subsidiary executes and delivers a supplemental indenture to the indenture providing for a Subsidiary Guarantee by such Restricted Subsidiary within ten business days; provided that this paragraph will not be applicable to any Guarantee of any Restricted Subsidiary that existed at the time such Person became a Restricted Subsidiary and was not Incurred in connection with, or in contemplation of, such Person becoming a Restricted Subsidiary.
If the Guaranteed Indebtedness:
Limitation on Transactions with Affiliates
CyrusOne will not, and will not permit any of its Restricted Subsidiaries to enter into, renew or extend any transaction (including, without limitations, the purchase, sale, lease or exchange of property or assets, or the rendering of any service) with any Affiliate of CyrusOne or any of its Restricted Subsidiaries (each an "Affiliate Transaction"), except upon terms no less favorable to CyrusOne or such Restricted Subsidiary than could be obtained, at the time of such transaction or, if such transaction is pursuant to a written agreement, at the time of the execution of the agreement providing therefor, in a comparable arm's-length transaction with a Person that is not such an Affiliate.
36
The foregoing limitation does not limit, and will not apply to:
37
Notwithstanding the foregoing, any transaction or series of related transactions covered by the first paragraph of this covenant and not covered by (2) through (13) of the immediately foregoing paragraph (X) the aggregate amount of which exceeds $10.0 million in value must be approved or determined to be fair in the manner provided for in clause (1)(A) or (B) above and (Y) the aggregate amount of which exceeds $35.0 million in value must be determined to be fair in the manner provided for in clause (1)(B) above.
Limitation on Asset Sales
CyrusOne will not, and will not permit any of its Restricted Subsidiaries to, consummate any Asset Sale, unless:
Within 365 days after the receipt of any Net Cash Proceeds from an Asset Sale, CyrusOne will or will cause such Net Cash Proceeds (or an amount equal to the amount of such Net Cash Proceeds) to be applied to:
Pending the application of any such Net Cash Proceeds as described above, CyrusOne may invest such Net Cash Proceeds in any manner that is not prohibited by the indenture.
The amount of such excess Net Cash Proceeds required to be applied (or to be committed to be applied) during such 365-day period as set forth in the preceding sentence and not applied as so required by the end of such period will constitute "Excess Proceeds." If, as of the first day of any
38
calendar month, the aggregate amount of Excess Proceeds not previously subject to an Offer to Purchase pursuant to this covenant totals more than $25.0 million, CyrusOne must commence, not later than the fifteenth business day of such month, and consummate an Offer to Purchase from the holders of the notes and all holders of other Indebtedness that is pari passu with the notes containing provisions similar to those set forth in the indenture with respect to offers to purchase or redeem with the proceeds of sales of assets, on a pro rata basis, an aggregate principal amount of notes and such other pari passu Indebtedness equal to the Excess Proceeds on such date, at a purchase price equal to 100% of the principal amount of the notes and such other pari passu Indebtedness plus, in each case, accrued interest to the Payment Date.
If the aggregate principal amount of notes and other pari passu Indebtedness with the notes tendered into such Offer to Purchase exceeds the amount of Excess Proceeds, then the notes and such other pari passu Indebtedness will be purchased on a pro rata basis based on the principal amount of the notes and such other pari passu Indebtedness tendered. Upon completion of each Offer to Purchase, any remaining Excess Proceeds subject to such Offer to Purchase will no longer be deemed to be Excess Proceeds and may be applied to any other purpose not prohibited by the indenture.
Repurchase of Notes upon a Change of Control
Unless CyrusOne has previously or concurrently mailed a redemption notice with respect to all existing notes as described above under the caption "Optional Redemption" and all conditions precedent applicable to such redemption notice have been satisfied, CyrusOne must commence, within 30 days of the occurrence of a Change of Control, an Offer to Purchase for all notes then outstanding, at a purchase price equal to 101% of the principal amount of the notes, plus accrued interest to the Payment Date.
There can be no assurance that CyrusOne will have sufficient funds available at the time of any Change of Control to make any debt payment (including repurchases of notes) required by the foregoing covenant (as well as any covenant that may be contained in other securities of CyrusOne or that might be outstanding at the time).
Subject to the following paragraph, the provisions described above that require CyrusOne to make an Offer to Purchase following a Change of Control will be applicable regardless of whether any other provisions of the indenture are applicable. Except as described above with respect to a Change of Control, the indenture does not contain provisions that permit the holders of the notes to require that CyrusOne repurchase or redeem the notes in the event of a takeover, recapitalization or similar transaction. In addition, holders of notes may not be entitled to require CyrusOne to purchase their notes in certain circumstances involving a significant change in the composition of CyrusOne's or Holdings' Board of Directors, including in connection with a proxy contest where CyrusOne's or Holdings' Board of Directors does not approve a dissident slate of directors but approves them as Continuing Directors.
CyrusOne will not be required to make an Offer to Purchase upon a Change of Control if a third party makes the Offer to Purchase in the manner, at the times and otherwise in compliance with the requirements set forth in the indenture applicable to an Offer to Purchase made by CyrusOne and purchases all notes validly tendered and not withdrawn under such Offer to Purchase. Notwithstanding anything to the contrary herein, an Offer to Purchase may be made in advance of a Change of Control, conditioned upon the consummation of such Change of Control, if a definitive agreement is in place for the Change of Control at the time the Offer to Purchase is made.
CyrusOne will comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of notes as a result of Change of Control. To the extent that the provisions of any securities laws or regulations conflict with the provisions of the covenant described hereunder, we will comply with the applicable
39
securities laws and regulations and will not be deemed to have breached our obligations under the covenant described hereunder by virtue of our compliance with such securities laws or regulations.
If the terms of any Credit Facilities prohibit CyrusOne from making an Offer to Purchase or from purchasing the notes pursuant thereto, prior to the mailing of the notice to holders, but in any event within 30 days following any Change of Control, CyrusOne covenants to:
CyrusOne must first comply with the covenant described above before it will be required to purchase notes in the event of a Change of Control; provided, however, that CyrusOne's failure to comply with the covenant described in the preceding sentence or to make an Offer to Purchase because of any such failure shall constitute a default described in clause (4) under "Events of Default" below (and not under clause (3) thereof).
The definition of "Change of Control" includes a disposition of all or substantially all of the assets of CyrusOne and its Subsidiaries, taken as a whole, to any Person. Although there is a limited body of case law interpreting the phrase "substantially all," there is no precise established definition of the phrase under applicable law. Accordingly, in certain circumstances there may be a degree of uncertainty as to whether a particular transaction would involve a disposition of "all or substantially all" of the assets of CyrusOne and its Subsidiaries, taken as a whole. As a result, it may be unclear as to whether a Change of Control has occurred and whether a holder of notes may require CyrusOne to make an offer to repurchase the notes as described above.
The provisions under the indenture governing the notes relative to CyrusOne's obligation to make an offer to repurchase the notes as a result of a Change of Control may be waived or modified with the written consent of the holders of a majority in principal amount of the notes.
SEC Reports and Reports to Holders
Whether or not Holdings is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, Holdings must provide the Trustee and, upon written request, the holders of notes within fifteen (15) business days after filing, or in the event no such filing is required, within fifteen (15) business days after the end of the time periods specified in those sections with:
provided that, the foregoing delivery requirements will be deemed satisfied if the foregoing materials are available on the SEC's EDGAR system or on CyrusOne's or Holdings' website within the applicable time period specified above.
In addition, following the earlier of (x) the consummation of the initial public offering of Holdings or (y) the consummation of the exchange offer relating to the Existing Notes, whether or not required by the SEC, Holdings will, if the SEC will accept the filing, file a copy of all of the information and
40
reports referred to in clauses (1) and (2) of the preceding paragraph with the SEC for public availability within the time periods specified in the SEC's rules and regulations. If CyrusOne had any Unrestricted Subsidiaries during the relevant period, Holdings will also provide to the trustees and the holders of the notes information sufficient to ascertain the financial condition and results of operations of CyrusOne and its Restricted Subsidiaries, excluding in all respects the Unrestricted Subsidiaries.
For so long as any of the notes remain outstanding and constitute "restricted securities" under Rule 144, Holdings will furnish to the holders of the notes and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.
Notwithstanding anything herein to the contrary, Holdings will not be deemed to have failed to comply with any provision of this reporting covenant for purposes of clause (4) set forth below under the caption "Events of Default" as a result of the late filing or provision of any required information or report until 90 days after the date any such information or report was due.
Limitation on Activities of Finance Corp.
Finance Corp. will not hold any material assets, become liable for any material obligations or engage in any significant business activities; provided that Finance Corp. may be a co-obligor or guarantor with respect to Indebtedness if CyrusOne is an obligor on such Indebtedness and the net proceeds of such Indebtedness are received by CyrusOne, Finance Corp. or one or more Subsidiary Guarantors. At any time after CyrusOne is a corporation, Finance Corp. may consolidate or merge with or into CyrusOne or any Restricted Subsidiary.
Limitation on Activities of Holdings and CyrusOne GP
Neither Holdings nor CyrusOne GP will Incur any Indebtedness other than their respective Note Guarantees issued on the Original Issue Date and guarantees of additional Indebtedness (including Additional Notes) or leases of CyrusOne and its Restricted Subsidiaries that is permitted to be Incurred by CyrusOne or such Restricted Subsidiary under the covenant described above under the caption "Limitation on Indebtedness." In addition:
41
with transfer agents, proxy agents, shareholder services, investor relations, counsel, accountants and other advisors;
Notwithstanding anything to the contrary in this covenant, Holdings and/or CyrusOne GP may consolidate, merge or sell all or substantially all of its assets in accordance with the provisions of the indenture described below under "Consolidation, Merger and Sale of Assets" and above under "Repurchase of Notes Upon a Change of Control."
Events of Default
Events of Default under the indenture are defined as the following:
42
discharged in full or such acceleration has not been rescinded or annulled within 30 days of such acceleration; and/or
If an Event of Default (other than an Event of Default specified in clause (7) or (8) above that occurs with respect to Holdings, CyrusOne GP, an Issuer or any Significant Subsidiary) occurs and is
43
continuing under the indenture, the Trustee or the holders of at least 25% in aggregate principal amount of the notes then outstanding, by written notice to CyrusOne (and to the Trustee if such notice is given by the holders), may, and the Trustee at the request of the holders of at least 25% in aggregate principal amount of the notes then outstanding will, declare the principal of, premium, if any, and accrued interest on the notes to be immediately due and payable. Upon a declaration of acceleration, such principal of, premium, if any, and accrued interest will be immediately due and payable. In the event of a declaration of acceleration because an Event of Default set forth in clause (5) above has occurred and is continuing, such declaration of acceleration will be automatically rescinded and annulled if the event of default triggering such Event of Default pursuant to clause (5) shall be remedied or cured by Holdings, an Issuer or the relevant Significant Subsidiary or waived by the holders of the relevant Indebtedness within 60 days after the declaration of acceleration with respect thereto.
If an Event or Default specified in clause (7) or (8) above occurs with respect to Holdings, CyrusOne GP, an Issuer or any Significant Subsidiary, the principal of, premium, if any, and accrued interest on the notes then outstanding will automatically become and be immediately due and payable without any declaration or other act on the part of the Trustee or any holder. The holders of at least a majority in principal amount of the outstanding notes by written notice to CyrusOne and to the Trustee, may waive all past defaults and rescind and annul a declaration of acceleration and its consequences if:
The holders of a majority in aggregate principal amount of the outstanding notes may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee. However, the Trustee may refuse to follow any direction that conflicts with law or the indenture, that may involve the Trustee in personal liability, or that the Trustee determines in good faith may be unduly prejudicial to the rights of holders of notes not joining in the giving of such direction and may take any other action it deems proper that is not inconsistent with any such direction received from holders of notes. A holder may not pursue any remedy with respect to the indenture or the notes unless:
However, such limitations do not apply to the right of any holder of a note to receive payment of the principal of, premium, if any, or interest on, such note or to bring suit for the enforcement of any such payment on or after the due date expressed in the notes, which right shall not be impaired or affected without the consent of the holder.
44
The indenture requires certain officers of CyrusOne to certify, on or before a date not more than 120 days after the end of each fiscal year, that a review has been conducted of the activities of CyrusOne and Holdings and the Restricted Subsidiaries and of their performance under the indenture and that CyrusOne, Holdings and the Restricted Subsidiaries have fulfilled all obligations thereunder, or, if there has been a default in fulfillment of any such obligation, specifying each such default and the nature and status thereof. CyrusOne and Holdings will also be obligated to notify the Trustee of any default or defaults in the performance of any covenants or agreements under the indenture.
Consolidation, Merger and Sale of Assets
The Issuers, Holdings and CyrusOne GP. None of Holdings, CyrusOne GP nor either of the Issuers will consolidate or merge with or into, or sell, convey, transfer, lease or otherwise dispose (collectively, a "transfer") of all or substantially all of its property and assets (as an entirety or substantially an entirety in one transaction or a series of related transactions) to, any Person or permit any Person to merge with or into Holdings, CyrusOne GP or an Issuer unless:
Upon any consolidation or merger or any transfer of all or substantially all of Holdings', CyrusOne GP's or such Issuer's assets, in accordance with the foregoing, the successor Person formed by such consolidation or into which Holdings, CyrusOne GP or such Issuer is merged or to which such transfer is made, will succeed to, be substituted for, and may exercise every one of Holdings', CyrusOne GP's or such Issuer's rights and powers under the indenture with the same effect as if such successor Person had been named therein as Holdings, CyrusOne GP or such Issuer and, except in the case of the lease or a sale or other transfer of less than all assets, Holdings, CyrusOne GP or such Issuer will be released from the obligations under the notes and the Note Guarantee, as applicable.
45
Subsidiary Guarantors. No Subsidiary Guarantor will consolidate or merge with or into, or transfer all or substantially all of its property and assets (as an entirety or substantially an entirety in one transaction or a series of related transactions) to, any Person (other than CyrusOne or another Guarantor), unless:
Notwithstanding the foregoing, the Note Guarantee by a Subsidiary Guarantor that is a Restricted Subsidiary of CyrusOne will be automatically released as set forth under "The Note Guarantees."
Legal Defeasance and Covenant Defeasance
CyrusOne may at any time, at the option of its Board of Directors evidenced by a Board Resolution set forth in an officers' certificate, elect to have all of the Issuers' obligations discharged with respect to the outstanding notes and all obligations of the Subsidiary Guarantors discharged with respect to their Note Guarantees ("Legal Defeasance") except for:
In addition, CyrusOne may, at its option and at any time, elect to have the obligations of the Issuers and the Subsidiary Guarantors released with respect to certain covenants (including their obligation to make an Offer to Purchase upon a Change of Control or Asset Sale, as the case may be) that are described in the indenture ("Covenant Defeasance") and thereafter any omission to comply with those covenants will not constitute a Default or Event of Default with respect to the notes. In the event Covenant Defeasance occurs, all Events of Default described under "Events of Default" (except those relating to payments on the notes or bankruptcy, receivership, rehabilitation or insolvency events with respect to Holdings, CyrusOne GP and the Issuers) will no longer constitute an Event of Default with respect to the notes.
In order to exercise either Legal Defeasance or Covenant Defeasance:
46
applicable redemption date, as the case may be, and CyrusOne must specify whether the notes are being defeased to such stated date for payment or to a particular redemption date;
Satisfaction and Discharge
The indenture will be discharged and will cease to be of further effect as to all notes issued thereunder, when:
47
premium on, if any, and interest, if any, on, the notes to the date of maturity or redemption;
In addition, CyrusOne must deliver an officers' certificate and an opinion of counsel to the Trustee stating that all conditions precedent to satisfaction and discharge have been satisfied.
Modification and Waiver
Subject to certain limited exceptions, modifications, waivers and amendments of the indenture, the notes and the Note Guarantees may be made with the consent of the holders of not less than a majority in aggregate principal amount of the outstanding notes (including consents obtained in connection with a tender offer or exchange offer for the notes) and any past Default or compliance with any provisions may also be waived with the consent of the holders of a majority in principal amount of the outstanding notes; provided that no such modification, waiver or amendment may, without the consent of each holder affected thereby:
Modifications, waivers and amendments of the indenture, the notes and the Note Guarantees may, without notice to or the consent of any noteholder, be made:
48
No Personal Liability of Incorporators, Partners, Stockholders, Officers, Directors or Employees
The indenture provides that no recourse for the payment of the principal of, premium, if any, or interest on any of the notes or for any claim based thereon or otherwise in respect thereof, and no recourse under or upon any obligation, covenant or agreement of CyrusOne or any of the Guarantors in the indenture, or in any of the notes or because of the creation of any Indebtedness represented thereby, shall be had against any incorporator, partner, stockholder, officer, director, employee or controlling person in their capacity as such of CyrusOne, the Guarantors or of any successor Person thereof. Each holder, by accepting the notes, waives and releases all such liability.
Governing Law
The indenture provides that it and the notes and the Note Guarantees are governed by, and construed in accordance with, the laws of the State of New York.
Concerning the Trustee
The indenture provides that, except during the continuance of an Event of Default, the Trustee will not be liable, except for the performance of such duties as are specifically set forth in the
49
indenture. If an Event of Default has occurred and is continuing, the Trustee will use the same degree of care and skill in its exercise of the rights and powers vested in it under the indenture as a prudent person would exercise under the circumstances in the conduct of such person's own affairs.
The indenture and provisions of the Trust Indenture Act incorporated by reference into the indenture contain limitations on the rights of the Trustee, should it become a creditor of CyrusOne, Holdings or the Subsidiary Guarantors, to obtain payment of claims in certain cases or to realize on certain property received by it in respect of any such claims, as security or otherwise. The Trustee is permitted to engage in other transactions; provided that if it acquires any conflicting interest, it must eliminate such conflict or resign.
Additional Information
Anyone who receives this prospectus may obtain a copy of the indenture without charge by writing to CyrusOne LP, 1649 West Frankford Road, Carrollton, Texas 75007, Attention: Investor Relations.
Certain Definitions
Set forth below are definitions of certain terms contained in the indenture that are used in this description. Please refer to the indenture for the definitions of other capitalized terms used in this description that are not defined below.
"Acquired Indebtedness" means Indebtedness of a Person existing at the time such Person becomes a Restricted Subsidiary or assumed in connection with an Asset Acquisition from such Person by a Restricted Subsidiary whether or not Incurred by such Person in connection with, or in anticipation of, such Person becoming a Restricted Subsidiary or such Asset Acquisition; provided that Indebtedness of such Person that is redeemed, defeased, retired or otherwise repaid at the time of or immediately upon consummation of the transactions by which such Person becomes a Restricted Subsidiary or such Asset Acquisition will not be Acquired Indebtedness.
"Additional Notes" means additional notes (other than the Existing Notes) issued under and in accordance with the applicable provisions of the indenture, as part of the same series as the Existing Notes.
"Adjusted Total Assets" means, as of any date, the Total Assets at the end of the most recent fiscal quarter preceding such date for which internal financial statements are available, adjusted, to the extent practicable in the sole good faith judgment of CyrusOne's chief financial officer, for any Asset Sale or any Asset Acquisition consummated since the end of such fiscal quarter, in each case, involving aggregate consideration in excess of $25.0 million (each such adjustment to be made in accordance with the good faith judgment of CyrusOne's Chief Financial Officer).
"Affiliate" means, as applied to any Person, any other Person directly or indirectly controlling, controlled by, or under direct or indirect common control with, such Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.
"Applicable Premium" means, with respect to any note on any redemption date the greater of (1) 1.0% of the principal amount of such note and (2) the excess (if any) of (A) the present value at such redemption date of (i) the redemption price of such note at November 15, 2017, as set forth above under the caption "Optional Redemption" (excluding any accrued but unpaid interest) plus (ii) all required interest payments due on such note through November 15, 2017 (excluding accrued but unpaid interest), computed using a discount rate equal to the Treasury Rate on such redemption date plus 50 basis points over (B) the principal amount of such note.
50
"Asset Acquisition" means:
"Asset Sale" means any sale, transfer or other disposition (each, a "disposition"), including by way of merger, consolidation or Sale and Leaseback Transaction, in one transaction or a series of related transactions by CyrusOne or any of its Restricted Subsidiaries to any Person other than CyrusOne or any of its Restricted Subsidiaries of any assets or properties consisting of:
51
"Attributable Debt" means, in respect of a Sale and Leaseback Transaction, the present value, discounted at the interest rate implicit in the Sale and Leaseback Transaction, of the total obligations of the lessee for rental payments during the remaining term of the lease in the Sale and Leaseback Transaction.
"Average Life" means at any date of determination with respect to any Indebtedness, the quotient obtained by dividing:
"Board of Directors" means:
"Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of a company to have been duly adopted by the Board of Directors of such company and to be in full force and effect on the date of such certificate, and delivered to the Trustee.
"Capital Stock" means, with respect to any Person, any and all shares, interests, participation or other equivalents (however designated, whether voting or non-voting), including partnership interests, whether general or limited, in the equity of such Person, whether outstanding on the Original Issue Date or issued thereafter.
"Capitalized Lease" means, as applied to any Person, any lease of any property, whether real, personal or mixed, of which the discounted present value of the rental obligations of such Person as lessee is required to be classified and accounted for as a capitalized lease for financial reporting purposes in accordance with GAAP.
52
"Capitalized Lease Obligations" means the discounted present value of the rental obligations under a Capitalized Lease as reflected on the balance sheet of such Person in accordance with GAAP.
"Capitalized Value" means, as of any date:
"Change of Control" means the occurrence of any of the following:
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" means, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated, whether voting or non-voting) that have no preference on liquidation or with respect to distributions over any other class of Capital Stock, including partnership interests, whether general or limited, of such Person's equity, whether outstanding on the Original Issue Date or issued thereafter, including, without limitation, all series and classes of common stock.
53
"Common Units" means the limited partnership units of CyrusOne, that by their terms are redeemable at the option of the holder thereof and that, if so redeemed, at the election of Holdings are redeemable for cash or Common Stock of Holdings.
"Consolidated EBITDA" means, for any period, the Consolidated Net Income of Holdings, CyrusOne GP, CyrusOne and its Restricted Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP and on a Pro Forma Basis, plus, to the extent such amount was deducted in calculating Consolidated Net Income (without duplication):
In addition, Consolidated EBITDA will exclude the impact of all currency translation gains or losses related to non-operating currency transactions (including any net loss or gain resulting from Currency Agreements).
"Consolidated Interest Expense" means, for any period, the aggregate amount of interest expense in respect of Indebtedness of Holdings, CyrusOne GP, CyrusOne and its Restricted Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP and on a Pro Forma Basis, including (without duplication):
54
excluding, to the extent included in interest expense above:
"Consolidated Net Income" means, for any period, the net income (loss) of Holdings, CyrusOne GP, CyrusOne and its Restricted Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP, without any reduction in respect of dividends on Preferred Stock, but without giving effect to deductions for non-controlling or minority interests; provided that the following items will be excluded in computing Consolidated Net Income, without duplication:
55
"continuing" means, with respect to any Default or Event of Default, that such Default or Event of Default has not been cured or waived.
"Continuing Directors" means, as of any date of determination, any member of the Board of Directors of CyrusOne or Holdings, as applicable, who:
"Construction in Process" means, as of any date, the aggregate amount of costs incurred for any build-outs, redevelopment, construction, or tenant improvements of a Property on or prior to the last day of the most recent fiscal quarter of Holdings for which internal financial statements are available that have been capitalized to and are reflected on the balance sheet of Holdings as of the end of such fiscal quarter.
"Credit Agreement" means that certain Credit Agreement, dated as of the Original Issue Date, among Holdings, CyrusOne Finance Corp., CyrusOne, the lenders party thereto and Deutsche Bank Trust Company Americas, as administrative agent, including any related notes, guarantees and collateral documents as the same may be amended, modified or supplemented from time to time.
"Credit Facilities" means one or more debt facilities (including the Credit Agreement), commercial paper facilities, securities purchase agreement, indenture or similar agreement, in each case, with banks or other institutional lenders or investors providing for revolving loans, term loans, receivables financing (including through the sale of receivables to lenders or to special purpose entities formed to borrow from lenders against such receivables) letters of credit or the issuance of securities, including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith, and, in each case, as amended, restated, replaced (whether upon or after termination or otherwise), refinanced, supplemented, modified or otherwise changed (in whole or in part, and without limitation as to amount, terms, conditions, covenants and other provisions) from time to time.
"Currency Agreement" means any agreement or arrangement designed to protect against fluctuations in currency exchange rates.
"Default" means any event that is, or after notice or passage of time or both would be, an Event of Default.
56
"Designated Preferred Stock" means Preferred Stock of Holdings or CyrusOne (in each case other than Disqualified Stock) that is issued for cash (other than to a Restricted Subsidiary) and is so designated as Designated Preferred Stock, pursuant to an officer's certificate executed by the principal financial officer of Holdings or CyrusOne, as the case may be, on the issuance date thereof, the cash proceeds of which are excluded from the calculation set forth in clause (C) of the first paragraph of the covenant described above under the caption "CovenantsLimitation on Restricted Payments."
"Development Property" means Property owned or acquired by Holdings, CyrusOne GP, CyrusOne or any of its Restricted Subsidiaries for which Holdings, CyrusOne or such Restricted Subsidiary has obtained the necessary permits (including a building permit to permit construction) and on which Holdings, CyrusOne or any of its Restricted Subsidiaries is actively pursuing construction and for which construction is proceeding to completion without undue delay from permit delay or denial, construction delays or otherwise, all pursuant to the ordinary course of business of Holdings, CyrusOne or such Restricted Subsidiary. Notwithstanding the foregoing, any such Property will no longer be considered to be a Development Property at the earlier of:
"Disqualified Stock" means any class or series of Capital Stock (other than Common Units) of any Person that by its terms or otherwise is:
provided that any Capital Stock that would not constitute Disqualified Stock but for (A) provisions thereof giving holders thereof the right to require such Person to repurchase or redeem such Capital Stock upon the occurrence of an "asset sale" or "change of control" occurring prior to the Stated Maturity of the notes will not constitute Disqualified Stock if the "asset sale" or "change of control" provisions applicable to such Capital Stock are no more favorable to the holders of such Capital Stock than the provisions of the indenture described above under the captions "CovenantsLimitation on Asset Sales" and "CovenantsRepurchase of Notes upon a Change of Control," and such Capital Stock specifically provides that such Person will not repurchase or redeem any such stock pursuant to such provision prior to CyrusOne's repurchase of the notes as are required to be repurchased pursuant to the provisions of the indenture described above under the captions "CovenantsLimitation on Asset Sales" and "CovenantsRepurchase of Notes upon a Change of Control" or (B) customary put and call arrangements between joint venture partners with respect to their common equity investments in joint ventures will not, in any such case, be treated as Disqualified Stock solely as a result of the items referred to in this proviso.
57
"Equity Interests" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock).
"Equity Offering" means a public or private offering of Equity Interests (other than Disqualified Stock or Designated Preferred Stock) of (1) CyrusOne or (2) Holdings; provided that the net proceeds of any such public or private offering by Holdings are contributed by Holdings to the common equity capital of CyrusOne.
"Exchange Act" means the U.S. Securities Exchange Act of 1934, as amended.
"Exchange Offer" means the Issuers' offer to exchange up to $100.0 million principal amount of Initial Notes for a like principal amount of Exchange Notes.
"Fair Market Value" means the price that would be paid in an arm's-length transaction under the applicable circumstances, as determined in good faith by the Chief Financial Officer of CyrusOne; provided that if the value of the transaction exceeds $10.0 million, such determination will be made by the Board of Directors of CyrusOne, whose determination will be conclusive if evidenced by a Board Resolution.
"Foreign Subsidiary" means any Restricted Subsidiary that is not organized under the laws of the United States of America or any State thereof or the District of Columbia, and any direct or indirect Subsidiary of such Foreign Subsidiary.
"Formation Transactions" means the transactions described in the Original Offering Memorandum under the caption "Structure and Formation of Our Company" related to the formation of Holdings, CyrusOne and its Subsidiaries and the initial public offering of Holdings.
"Funds From Operations" means, for any period, the Consolidated Net Income of Holdings, CyrusOne GP, CyrusOne and its Restricted Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP, plus, to the extent deducted in calculating Consolidated Net Income (without duplication):
"GAAP" means generally accepted accounting principles in the United States of America as in effect as of the Original Issue Date, including without limitation, as set forth in the Financial Accounting Standards Board's "Accounting Standards Codification." All ratios and computations contained or referred to in the indenture will be computed in conformity with GAAP applied on a consistent basis.
58
"Guarantee" means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person:
"Guarantors" means Holdings, CyrusOne GP and the Subsidiary Guarantors, collectively.
"Hedging Obligations" means, with respect to any specified Person, the obligations of such Person under an Interest Rate Agreement or Currency Agreement.
"Incur" means, with respect to any Indebtedness, to incur, create, issue, assume, Guarantee or otherwise become liable for or with respect to, or become responsible for the payment of, contingently or otherwise, such Indebtedness, including an "Incurrence" of Acquired Indebtedness; provided that neither the accrual of interest nor the accretion of original issue discount will be considered to be an Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person at any date of determination (without duplication):
59
if, and to the extent, any of the preceding items (other than items (3), (6), (7) or (8)) would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP.
The amount of Indebtedness of any Person at any date will be the outstanding balance at such date of all unconditional obligations of the type described above and, with respect to obligations under any Guarantee, the maximum liability upon the occurrence of the contingency giving rise to the obligation; provided that:
"Interest Coverage Ratio" means, as of any date, the ratio of (1) the Consolidated EBITDA of CyrusOne and its Restricted Subsidiaries for the most recent fiscal quarter for which financial statements are available, to (2) the Consolidated Interest Expense of CyrusOne and its Restricted Subsidiaries for such fiscal quarter.
"Interest Rate Agreement" means any interest rate swap agreement (whether from fixed to floating or from floating to fixed), interest rate cap agreement or interest rate collar agreement and any other agreement or arrangement designed to manage interest rates or interest rate risk.
"Investment" in any Person means any direct or indirect advance, loan or other extension of credit (including without limitation by way of Guarantee or similar arrangement, but excluding advances to customers in the ordinary course of business that are, in conformity with GAAP, recorded as accounts receivable on the consolidated balance sheet of CyrusOne and its Restricted Subsidiaries, and residual liabilities with respect to assigned leaseholds incurred in the ordinary course of business) or capital contribution to (by means of any transfer of cash or other property (tangible or intangible) to another Person or any payment for property or services solely for the account or use of another Person, or otherwise), or any purchase or acquisition of Equity Interests, bonds, notes, debentures or other similar instruments issued by, such Person and will include:
provided that the Fair Market Value of the Investment remaining in any Person that has ceased to be a Restricted Subsidiary will be deemed not to exceed the aggregate amount of Investments previously made in such Person valued at the time such Investments were made, less the net reduction of such Investments. For purposes of the definition of "Unrestricted Subsidiary" and the provisions of the indenture described above under the caption "CovenantsLimitation on Restricted Payments:"
60
"Investment Grade" means a rating equal to or higher than Baa3 (or the equivalent) by Moody's and BBB (or the equivalent) by S&P.
"Land Assets" means real property owned by Holdings, CyrusOne GP, CyrusOne or any of its Restricted Subsidiaries with respect to which the commencement of grading, construction of improvements (other than improvements that are not material and are temporary in nature) and construction of infrastructure has not yet commenced.
"Leased Rate" means, with respect to any Property at any time, the ratio, expressed as a percentage, of (a) the Net Rentable Area of such Property actually leased by tenants to (b) the aggregate Net Rentable Area of such Property.
"Leverage Ratio" means, on any date, the ratio of (1) the aggregate amount of Indebtedness of CyrusOne and its Restricted Subsidiaries as of such date, determined, on a consolidated basis in accordance with GAAP, to (2) the Consolidated EBITDA of CyrusOne and its Restricted Subsidiaries for the most recent fiscal quarter for which financial statements are available, multiplied by four.
"Lien" means any mortgage, deed of trust, pledge, security interest, encumbrance, lien or charge of any kind (including without limitation, any conditional sale or other title retention agreement or lease in the nature thereof).
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Cash Proceeds" means with respect to any Asset Sale, the proceeds received by CyrusOne or any Restricted Subsidiary as a result of such Asset Sale in the form of cash or cash equivalents and including payments in respect of deferred payment obligations (to the extent corresponding to the principal, but not interest, component thereof) when received in the form of cash or cash equivalents and proceeds from the conversion of other property received when converted to cash or cash equivalents, without duplication, net of: (i) brokerage commissions and other fees and expenses (including fees and expenses of counsel, accountants and investment bankers and title and recording taxes) related to such Asset Sale; (ii) provisions for all taxes actually paid or payable, as reasonably determined by CyrusOne (and taking into account whether any such sale qualifies for non-recognition treatment under Section 1031 of the Code), as a result of such Asset Sale by CyrusOne and its Restricted Subsidiaries, taken as a whole, including (without duplication) taxes that would have been payable as a result of such Asset Sale by CyrusOne and its Restricted Subsidiaries if CyrusOne and each Restricted Subsidiary in which CyrusOne owns less than 100% of the interests were taxable as a corporation or as a real estate investment trust, as such term is defined in the Code, for federal, state and local income tax purposes, whichever is greater, and, in each case, without taking into account any deductions, credits or other tax attributes that are not related to such Asset Sale, and at the highest rate that would be applicable to such entity at such time; (iii) all payments made on any Indebtedness which is secured by any assets subject to such Asset Sale, in accordance with the terms of any Lien upon or other security agreement of any kind with respect to such assets, or which must by its terms, or in order to obtain a necessary consent to such Asset Sale, or by applicable law, be repaid out of the proceeds from such Asset Sale; (iv) all distributions and other payments required to be made to minority interest holders in Restricted Subsidiaries as a result of such Asset Sale; (v) any portion of the purchase price from an Asset Sale placed in escrow, whether as a reserve for adjustment of the purchase price, for satisfaction of indemnities in respect of such Asset Sale or otherwise in connection with that Asset Sale; provided, however, that upon the termination of that escrow, Net Cash Proceeds will be increased by any portion of funds in the escrow that are released to CyrusOne or any Restricted Subsidiary; and (vi) amounts reserved by CyrusOne and its Restricted Subsidiaries against any liabilities associated with such Asset Sale, including without limitation, pension and other post-employment
61
benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale, all as determined on a consolidated basis in conformity with GAAP.
"Net Operating Income" means, for any Property for any period, an amount equal (but not less than zero) to the sum of:
Net Operating Income will exclude (i) all losses and expenses to the extent covered by third-party insurance which (x) has actually been reimbursed or otherwise paid in the applicable period or (y) CyrusOne reasonably determines will be reimbursed or paid by the applicable insurance carrier and so long as the applicable insurance carrier has been notified in writing of such loss or expense and not denied coverage therefor and, (ii) expenses relating to the relocation of customers as a result of any casualty or condemnation event or temporary shutdown, in whole or in part, of any Property.
"Net Rentable Area" means, as of any date, with respect to any Property, the net rentable square footage available for lease determined in accordance with the Rent Roll for such Property as of such date, the manner of such determination to be reasonably consistent for all Property of the same type unless otherwise determined to be necessary or appropriate in the good faith judgment of the Chief Financial Officer of CyrusOne.
"Note Guarantee" means a Guarantee of the notes by the Guarantors.
"Offer to Purchase" means an offer by CyrusOne to purchase notes from the holders commenced by mailing a notice to the Trustee and each holder stating:
62
On the Payment Date, CyrusOne will:
The paying agent will promptly mail to the holders of notes so accepted payment in an amount equal to the purchase price, and the Trustee will promptly authenticate and mail to such holders a new note equal in principal amount to any unpurchased portion of any note surrendered; provided that each note purchased and each new note issued will be in a principal amount of $2,000 and any higher integral multiple of $1,000. CyrusOne will publicly announce the results of an Offer to Purchase as soon as practicable after the Payment Date.
"Original Issue Date" means November 20, 2012, the date the Existing Notes were originally issued.
"Original Offering Memorandum" means the final offering memorandum, dated November 6, 2012, relating to the issuance of the Existing Notes. You may obtain a copy of the Original Offering Memorandum by writing to Investor Relations at 1649 West Frankford Road, Carrollton, Texas 75007.
"Partnership Agreement" means the agreement of limited partnership of CyrusOne, dated July 31, 2012, as such agreement may be amended, restated or replaced from time to time.
"Payment Date" has the meaning set forth in the definition of "Offer to Purchase."
"Permitted Holders" means Cincinnati Bell, Inc. and its controlled Affiliates and any Person acting in the capacity of an underwriter in connection with a bona fide public or private offering of Holdings' Capital Stock.
"Permitted Investment" means:
63
64
additional advances, contributions or other Investments of cash or other assets or other increases thereof (other than as a result of the accrual or accretion of interest or original issue discount or the issuance of pay-in-kind securities), in each case, pursuant to the terms of such Investment, or commitment, as in effect on the Original Issue Date;
"Permitted Joint Venture" means a Person owned 50% or more by CyrusOne and/or any of its Restricted Subsidiaries if:
"Permitted Non-Recourse Guarantees" means customary indemnities or Guarantees (including by means of separate indemnification agreements or carve-out guarantees) provided in the ordinary course of business by CyrusOne or any of its Restricted Subsidiaries in financing transactions that are directly or indirectly secured by real property or other real property-related assets (including Equity Interests) of a joint venture or Unrestricted Subsidiary and that may be full recourse or non-recourse to the joint venture or Unrestricted Subsidiary that is the borrower in such financing, but is non-recourse to CyrusOne or any Restricted Subsidiary of CyrusOne except for such indemnities and limited contingent guarantees as are consistent with customary industry practice (such as environmental indemnities and recourse triggers based on violation of transfer restrictions).
"Permitted Tax Payments" means, with respect to any year, any distributions to holders of Equity Interests of CyrusOne, or a Restricted Subsidiary in which CyrusOne owns less than 100% of the equity interests, sufficient to provide Holdings with a distribution equal to the amount of federal, state and local income taxes, as reasonably determined by CyrusOne, that have been actually paid or are payable by Holdings.
"Person" means an individual, partnership, corporation, limited liability company, unincorporated organization, trust or joint venture, or a governmental agency or political subdivision thereof or other entity.
"Preferred Stock" means, with respect to any Person, any and all shares, interests, participation or other equivalents (however designated, whether voting or non-voting) that have a preference on
65
liquidation or with respect to distributions over any other class of Capital Stock, including preferred partnership interests, whether general or limited, or such Person's preferred or preference stock, whether outstanding on the Original Issue Date or issued thereafter, including, without limitation, all series and classes of such preferred or preference stock.
"Pro Forma" or "Pro Forma Basis" means that the following adjustments have been made:
"Pro Forma Cost Savings" means, with respect to any period, the reduction in net costs and expenses that:
66
a pro forma income statement prepared in accordance with Regulation S-X under the Securities Act or (B) Holdings or CyrusOne reasonably determines will actually be realized within 12 months of the calculation date; or
"Property" means any real property or facility (and all fixtures, improvements, appurtenances and related assets thereof and therein) owned by Holdings or any of its Restricted Subsidiaries or in which Holdings or any of its Restricted Subsidiaries holds a leasehold interest.
"Qualified Receivables Transaction" means any transaction or series of transactions that may be entered into by CyrusOne or any of its Subsidiaries pursuant to which CyrusOne or any of its Subsidiaries may sell, convey or otherwise transfer to:
or may grant a security interest in, any accounts receivable (whether now existing or arising in the future) of CyrusOne or any of its Subsidiaries, and any assets related thereto including, without limitation, all collateral securing such accounts receivable, all contracts and all Guarantees or other obligations in respect of such accounts receivable, proceeds of such accounts receivable and other assets which are customarily transferred or in respect of which security interests are customarily granted in connection with asset securitization transactions involving accounts receivable. The grant of a security interest in any accounts receivable of CyrusOne or any of its Restricted Subsidiaries to secure Indebtedness Incurred under Credit Facilities shall not be deemed a Qualified Receivables Transaction.
"Rating Agencies" means S&P and Moody's; provided, that if either S&P or Moody's (or both) will cease issuing a rating on the notes for reasons outside the control of CyrusOne, CyrusOne may select a nationally recognized statistical rating agency to substitute for S&P or Moody's (or both).
"Receivables Entity" means a Wholly Owned Subsidiary of CyrusOne (or another Person formed for the purposes of engaging in a Qualified Receivables Transaction with CyrusOne in which CyrusOne or any Subsidiary of CyrusOne makes an Investment and to which CyrusOne or any Subsidiary of CyrusOne transfers accounts receivable and related assets) which engages in no activities other than in connection with the financing of accounts receivable of CyrusOne and its Subsidiaries, all proceeds thereof and all rights (contractual or other), collateral and other assets relating thereto, and any business or activities incidental or related to such business, and which is designated by the Board of Directors of CyrusOne (as provided below) as a Receivables Entity and
67
believes to be no less favorable to CyrusOne or such Subsidiary than those that might be obtained at the time from Persons that are not Affiliates of CyrusOne; and
Any such designation by the Board of Directors of CyrusOne shall be evidenced to the Trustee by filing with the Trustee a certified copy of the resolution of the Board of Directors of CyrusOne giving effect to such designation and an officer's certificate signed by the chief financial officer of CyrusOne certifying that such designation complied with the foregoing conditions.
"Reinstatement Date" has the meaning set forth in "Suspension of Covenants." "Rent Roll" means a report in respect of a Property setting forth its occupancy rates, lease rent and other information in a form reasonably acceptable to the Chief Financial Officer of CyrusOne.
"Restricted Subsidiary" means any Subsidiary of CyrusOne other than an Unrestricted Subsidiary. For avoidance of doubt, as of the date hereof, Finance Corp is a Restricted Subsidiary.
"Sale and Leaseback Transaction" means, with respect to any Person, an arrangement whereby such Person enters into a lease of property previously transferred by such Person to the lessor.
"Secured Indebtedness" means the portion of outstanding Indebtedness secured by a Lien upon the properties or other assets of CyrusOne or any of its Restricted Subsidiaries. For the avoidance of doubt, Attributable Debt will be considered to be secured by the asset that is the subject of the Sale and Leaseback Transaction.
"Significant Subsidiary" means any Restricted Subsidiary that would be a "Significant Subsidiary" of the Company within the meaning of Rule 1-02 under Regulation S-X promulgated by the SEC.
"S&P" means Standard & Poor's Ratings Group and its successors.
"Stabilized Property" means a completed Property which contains improvements that are in operating condition and available for occupancy, with respect to which valid certificates of occupancy have been issued and are in full force and effect, and that has achieved a Leased Rate of at least eighty-five percent (85%) for a period of not less than thirty (30) consecutive days; provided that a Development Property on which all improvements related to the development of such Property have been substantially completed (excluding tenants' improvements) for at least twenty-four (24) months or as to which its Capitalized Value exceeds its GAAP book value will constitute a Stabilized Property. For the avoidance of doubt, an individual parcel of Property can be the site of both one or more Stabilized Properties and Development Properties. Once a project becomes a Stabilized Property, it will remain a Stabilized Property as determined in the good faith judgment of the Chief Financial Officer of CyrusOne.
"Standard Securitization Undertakings" means representations, warranties, covenants and indemnities entered into by CyrusOne or any Subsidiary of CyrusOne which are customary in an accounts receivable transaction.
"Stated Maturity" means:
68
"Subordinated Indebtedness" of CyrusOne means any Indebtedness of CyrusOne that is expressly subordinated to and junior in right of payment to the notes. "Subordinated Indebtedness" of a Guarantor means any Indebtedness of such Guarantor that is expressly subordinated to and junior in right of payment to the Note Guarantee of such Guarantor.
"Subsidiary" means, with respect to any Person, any corporation, association or other business entity of which more than 50% of the voting power of the outstanding Voting Stock is owned, directly or indirectly, by such Person and/or one or more other Subsidiaries of such Person and the accounts of which would be consolidated with those of such Person in its consolidated financial statements in accordance with GAAP, if such statements were prepared as of such date.
"Subsidiary Guarantee" means a Note Guarantee by each Subsidiary Guarantor for payment of the notes by such Subsidiary Guarantor. As of the Original Issue Date, "Subsidiary Guarantor" means CyrusOne Foreign Holdings LLC, CyrusOne LLC and CyrusOne TRS and thereafter any other Restricted Subsidiary of CyrusOne that executes a Subsidiary Guaranty in compliance with the provisions described above under the caption "CovenantsLimitation on Issuances of Guarantees by Restricted Subsidiaries," but in each case excluding any Persons whose Note Guarantees have been released pursuant to the terms of the indenture. The current Subsidiary Guarantors are: CyrusOne Foreign Holdings LLC; CyrusOne LLC; CyrusOne TRS; Cervalis Holdings LLC; and Cervalis LLC.
"Subsidiary Indebtedness" means all unsecured Indebtedness of any Restricted Subsidiary that is not a Guarantor.
"Temporary Cash Investment" means any of the following:
69
"Total Assets" means, as of any date, the sum (without duplication) of:
in each case, determined on a consolidated basis as of the end of the most recent fiscal quarter for which internal financial statements are available.
"Total Unencumbered Assets" means, as of any date, the Adjusted Total Assets of Holdings and its Restricted Subsidiaries as of such date, less:
"Transaction Date" means, with respect to the Incurrence of any Indebtedness by CyrusOne or any of its Restricted Subsidiaries, the date such Indebtedness is to be Incurred, with respect to any Restricted Payment, the date such Restricted Payment is to be made, and with respect to any transaction described above under the caption "Consolidation, Merger and Sale of Assets," the day on which such transaction is to be consummated.
"Treasury Rate" means, as of any redemption date, the yield to maturity as of such redemption date of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15 (519) that has become publicly available at least two business days prior to the redemption date (or, if such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to the period from the redemption date to November 15, 2017; provided that if the period from the redemption date to such date is not equal to the constant maturity of a United States Treasury security for which a yield is given, the Treasury yield will be obtained by linear interpolation (calculated to the nearest one-twelfth of a year) from the yields of the nearest United States Treasury securities for which such yields are
70
given, except that if the period from the redemption date to such date is less than one year, the weekly average yield on actually traded United States securities adjusted to a constant maturity of one year will be used.
"Unrestricted Subsidiary" means
The Board of Directors of CyrusOne may designate any Restricted Subsidiary (including any newly acquired or newly formed Subsidiary of CyrusOne) to be an Unrestricted Subsidiary unless such Subsidiary owns any Capital Stock of, or owns or holds any Lien on any property of, CyrusOne or any of its Restricted Subsidiaries (other than Capital Stock of any Subsidiaries of such Subsidiary); provided that:
The Board of Directors of CyrusOne may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that:
Any such designation by the Board of Directors of CyrusOne will be evidenced to the Trustee by promptly filing with the Trustee a copy of the Board Resolution giving effect to such designation and an officers' certificate certifying that such designation complied with the foregoing provisions.
"Unsecured Indebtedness" means, as of any date, that portion of outstanding Indebtedness of CyrusOne and the Subsidiary Guarantors that is not Secured Indebtedness; provided that for purposes of determining compliance with the covenant described above under the caption "CovenantsMaintenance of Total Unencumbered Assets," all outstanding Indebtedness Incurred under clause (4)(A) of the covenant described above under the caption "CovenantsLimitation on Indebtedness" will be treated as being unsecured, whether or not it is actually secured.
"U.S. Dollar Equivalent" means with respect to any monetary amount in a currency other than U.S. dollars, at any time for determination thereof, the amount of U.S. dollars obtained by converting
71
such foreign currency involved in such computation into U.S. dollars at the spot rate for the purchase of U.S. dollars with the applicable foreign currency as published in The Wall Street Journal in the "Exchange Rates" column under the heading "Currency Trading" on the date two business days prior to such determination. Except as described under "CovenantsLimitation on Indebtedness," whenever it is necessary to determine whether CyrusOne has complied with any covenant in the indenture or a Default has occurred and an amount is expressed in a currency other than U.S. dollars, such amount will be treated as the U.S. Dollar Equivalent determined as of the date such amount is initially determined in such currency.
"Voting Stock" means with respect to any Person, Capital Stock of any class or kind ordinarily having the power to vote for the election of directors, managers or other voting members of the governing body of such Person.
"Wholly Owned Subsidiary" means a Restricted Subsidiary of CyrusOne all the Capital Stock of which (other than directors' qualifying shares) is owned by CyrusOne or another Wholly Owned Subsidiary.
72
Purpose of the Exchange Offer
In connection with the issuance and sale of the Initial Notes on July 1, 2015, we entered into a registration rights agreement with the initial purchasers for the benefit of the holders of the Initial Notes. Under the registration rights agreement, we agreed, among other things, to use our commercially reasonable efforts to file and to have declared effective an exchange offer registration statement under the Securities Act and to consummate an exchange offer. We are conducting this Exchange Offer to satisfy these obligations under the registration rights agreement.
We are making the Exchange Offer in reliance on the position of the SEC as set forth in certain no-action letters. However, we have not sought our own no-action letter. Based upon these interpretations by the SEC, we believe that a holder of Initial Notes who exchanges such Initial Notes for Exchange Notes in the Exchange Offer, generally may offer the Exchange Notes for resale, sell the Exchange Notes and otherwise transfer the Exchange Notes without further registration under the Securities Act and without delivery of a prospectus that satisfies the requirements of Section 10 of the Securities Act. This does not apply, however, to a holder who is our "affiliate" within the meaning of Rule 405 of the Securities Act. We also believe that a holder may offer, sell or transfer the Exchange Notes only if the holder acknowledges that the holder is acquiring the Exchange Notes in the ordinary course of its business and is not participating, does not intend to participate and has no arrangement or understanding with any person to participate in a distribution of the Exchange Notes.
Any holder of the Initial Notes using the Exchange Offer to participate in a distribution of Exchange Notes also cannot rely on the no-action letters referred to above. Any broker-dealer who holds Initial Notes acquired for its own account as a result of market- making activities or other trading activities and who receives Exchange Notes in exchange for such Initial Notes pursuant to the Exchange Offer may be a statutory underwriter, must deliver a prospectus meeting the requirements of the Securities Act in connection with any resales of Exchange Notes and must acknowledge such delivery requirement. See "Plan of Distribution."
Except as described above, this prospectus may not be used for an offer to resell, resale or other transfer of Exchange Notes.
The Exchange Offer is not being made to, nor will we accept tenders for exchange from, holders of Initial Notes in any jurisdiction in which the Exchange Offer or the acceptance of tenders would not be in compliance with the securities or blue sky laws of such jurisdiction.
Terms of the Exchange Offer
Upon the terms and subject to the conditions of the Exchange Offer, we will accept any and all Initial Notes validly tendered prior to 5:00 p.m., New York time, on the Expiration Date (as defined below) for the Exchange Offer. Promptly after the Expiration Date (unless extended as described in this prospectus), we will issue an aggregate principal amount of up to $100,000,000 of Exchange Notes and guarantees thereof for a like aggregate principal amount of Initial Notes and guarantees thereof tendered and accepted in connection with the Exchange Offer. The Exchange Notes issued in connection with the Exchange Offer will be delivered promptly after the Expiration Date. Holders may tender some or all of their Initial Notes in connection with the Exchange Offer, but only in an amount equal to $2,000 in principal amount or in integral multiples of $1,000 in excess thereof. The terms of the Exchange Notes will be identical in all material respects to the terms of the Initial Notes except that the Exchange Notes:
73
The Exchange Notes will evidence the same debt as the Initial Notes exchanged for the Exchange Notes and will be entitled to the benefits of the same indenture pursuant to which the Initial Notes were issued, which is governed by New York law, including any guarantees thereof. For a complete description of the terms of the Exchange Notes and the guarantees thereof, see "Description of the Notes." We will not receive any cash proceeds from the Exchange Offer.
As of the date of this prospectus, $100.0 million aggregate principal amount of Initial Notes is outstanding. Only registered holders of the Initial Notes, or their legal representatives and attorneys-in-fact, as reflected in the records of the trustee under the indenture, may participate in this offer. We will not set a fixed record date for determining registered holders of the Initial Notes entitled to participate in this offer. This prospectus, together with the letter of transmittal, is being sent to all registered holders of Initial Notes and to others believed to have beneficial interests in the Initial Notes.
In connection with the issuance of the Initial Notes, we arranged for the Initial Notes purchased by qualified institutional buyers and those sold in reliance on Regulation S under the Securities Act to be issued and transferable in book-entry form through the facilities of DTC, acting as depositary. Except as described under "Book-Entry, Delivery and Form", Exchange Notes will be issued in the form of a global note registered in the name of DTC or its nominee and each beneficial owner's interest in it will be transferable in book-entry form through DTC. See "Book-Entry, Delivery and Form".
Holders of Initial Notes do not have any appraisal or dissenters' rights in connection with the Exchange Offer. If you do not tender your Initial Notes or if you tender Initial Notes that are not accepted for exchange, your Initial Notes will remain outstanding and continue to accrue interest but will not retain any rights under the registration rights agreement. Existing transfer restrictions would continue to apply to Initial Notes that remain outstanding. See "Consequences of Failure to Properly Tender Initial Notes in the Exchange Offer" and "Risk FactorsRisk Factors Relating to the Notes and the Exchange OfferAny Initial Notes that are not exchanged will continue to be restricted securities and may become less liquid" for more information regarding Initial Notes outstanding after this offer.
We shall be considered to have accepted validly tendered Initial Notes if and when we have given oral (to be followed by prompt written notice) or written notice to the Exchange Agent (as defined below). The Exchange Agent will act as agent for the tendering holders for the purposes of receiving the Exchange Notes from us.
If any tendered Initial Notes are not accepted for exchange because of an invalid tender, the occurrence of certain other events described in this prospectus or otherwise, we will return the Initial Notes, without expense, to the tendering holder promptly after the Expiration Date for the Exchange Offer.
Holders who tender Initial Notes will not be required to pay brokerage commissions or fees or, subject to the instructions in the letter of transmittal, transfer taxes on exchange of Initial Notes in connection with the Exchange Offer. We will pay all charges and expenses, other than certain applicable taxes described below, in connection with the Exchange Offer. See "Fees and Expenses".
Expiration Date; Extensions; Amendments
Upon the terms and subject to the conditions described in this prospectus and in the accompanying letter of transmittal, we will accept for exchange any and all Initial Notes validly tendered on or before the Expiration Date and not withdrawn as permitted below. As used in this
74
section of the prospectus entitled, "The Exchange Offer," the term "Expiration Date" means 5:00 p.m., New York City time, on December 24, 2015. If, however, we, in our sole discretion, extend the period of time for which this offer is open, the term "Expiration Date" means the latest time and date to which this offer is so extended. Initial Notes tended in this offer must be in denominations of an amount equal to $2,000 in principal amount or in integral multiples of $1,000 in excess thereof.
We reserve the right, in our sole discretion:
If we amend the Exchange Offer in a manner that we consider material, we will disclose such amendment by means of a prospectus supplement, and we will extend the Exchange Offer for a period of five to ten business days.
If we determine to extend, amend or terminate the Exchange Offer, we will publicly announce this determination by making a timely release through an appropriate news agency.
If we delay accepting any Initial Notes or terminate the Exchange Offer, we promptly will pay the consideration offered, or return any Initial Notes deposited, pursuant to the Exchange Offer as required by Rule 14e-1(c).
Interest on the Exchange Notes
Interest on the Exchange Notes will accrue at a rate of 6.375% per year from the most recent date to which interest on the Initial Notes has been paid or, if no interest has been paid on such Initial Notes, from May 15, 2015. Interest on the Notes is payable semiannually in cash in arrears on May 15 and November 15 commencing May 15, 2016.
Conditions to the Exchange Offer
Notwithstanding any other provision of the Exchange Offer, or any extension of the Exchange Offer, we will not be required to accept for exchange, or to exchange any Exchange Notes for, any Initial Notes and we may terminate the Exchange Offer or, at our option, modify, extend or otherwise amend the Exchange Offer as provided in this prospectus before the acceptance of the Initial Notes, if prior to the Expiration Date:
75
liabilities or prospects or materially impair the contemplated benefits to us of the Exchange Offer or the exchange of Initial Notes for Exchange Notes under the Exchange Offer;
The foregoing conditions are for our sole benefit and may be waived by us, in whole or in part, in our absolute discretion. Any determination made by us concerning an event, development or circumstance described or referred to above will be conclusive and binding.
If any of the foregoing conditions are not satisfied, we may, at any time on or prior to the Expiration Date:
In addition, subject to applicable law, we may in our absolute discretion terminate the Exchange Offer for any other reason.
76
Effect of Tender
Any tender by a holder, and our subsequent acceptance of that tender, of Initial Notes will constitute a binding agreement between that holder and us upon the terms and subject to the conditions of the Exchange Offer described in this prospectus and in the letter of transmittal. The participation in the Exchange Offer by a tendering holder of Initial Notes will constitute the agreement by that holder to deliver good and marketable title to the tendered Initial Notes, free and clear of any and all liens, restrictions, charges, pledges, security interests, encumbrances or rights of any kind of third parties.
Absence of Dissenters' Rights
Holders of the Initial Notes do not have any appraisal or dissenters' rights in connection with the Exchange Offer.
Procedures For Tendering
If you wish to participate in the Exchange Offer and your Initial Notes are held by a custodial entity such as a bank, broker, dealer, trust company or other nominee, you must instruct that custodial entity to tender your Initial Notes on your behalf pursuant to the procedures of that custodial entity. Please ensure you contact your custodial entity as soon as possible to give them sufficient time to meet your requested deadline.
To participate in the Exchange Offer, you must either:
The Exchange Agent and DTC have confirmed that the Exchange Offer is eligible for ATOP with respect to book-entry notes held through DTC. The letter of transmittal, or a facsimile thereof, with any required signature guarantees, or, in the case of book-entry transfer, an agent's message in lieu of the letter of transmittal, and any other required documents, must be transmitted to and received by the Exchange Agent on or prior to the Expiration Date at its address set forth below under the caption "Exchange Agent". Initial Notes will not be deemed to have been tendered until the letter of transmittal and signature guarantees, if any, or agent's message, is received by the Exchange Agent. We have not provided guaranteed delivery procedures in conjunction with the Exchange Offer or under this prospectus.
The method of delivery of Initial Notes, the letter of transmittal and all other required documents to the Exchange Agent is at the election and risk of the holders. Instead of delivery by mail, we recommend that holders use an overnight or hand delivery service, properly insured. In all cases, sufficient time should be allowed to assure delivery to and receipt by the Exchange Agent on or prior to the Expiration Date. Do not send the letter of transmittal or any Initial Notes to anyone other than the Exchange Agent.
If you are tendering your Initial Notes in exchange for Exchange Notes and anticipate delivering your letter of transmittal and other documents other than through DTC, we urge you to contact promptly a bank, broker or other intermediary that has the capability to hold notes custodially through
77
DTC to arrange for receipt of any Initial Notes to be delivered pursuant to the Exchange Offer and to obtain the information necessary to provide the required DTC participant with account information in the letter of transmittal.
If you are a beneficial owner which holds Initial Notes through Euroclear (as defined below) or Clearstream (as defined below) and wish to tender your Initial Notes, you must instruct Euroclear or Clearstream, as the case may be, to block the account in respect of the tendered Initial Notes in accordance with the procedures established by Euroclear or Clearstream. You are encouraged to contact Euroclear and Clearstream directly to ascertain their procedure for tendering Initial Notes.
Book-Entry Delivery Procedures for Tendering Initial Notes Held with DTC
If you wish to tender Initial Notes held on your behalf by a nominee with DTC, you must:
Any financial institution that is a nominee in DTC, including Euroclear and Clearstream, must tender Initial Notes by effecting a book-entry transfer of Initial Notes to be tendered in the Exchange Offer into the account of the Exchange Agent at DTC by electronically transmitting its acceptance of the Exchange Offer through the ATOP procedures for transfer. DTC will then verify the acceptance, execute a book-entry delivery to the Exchange Agent's account at DTC and send an agent's message to the Exchange Agent. An "agent's message" is a message, transmitted by DTC to, and received by, the Exchange Agent and forming part of a book- entry confirmation, which states that DTC has received an express acknowledgement from an organization that participates in DTC (a "participant"), tendering Initial Notes that the participant has received and agrees to be bound by the terms of the letter of transmittal and that we may enforce the agreement against the participant. A letter of transmittal need not accompany tenders effected through ATOP.
Proper Execution and Delivery of the Letter of Transmittal
Signatures on a letter of transmittal or notice of withdrawal described under "Withdrawal of Tenders", as the case may be, must be guaranteed by an eligible guarantor institution unless the Initial Notes tendered pursuant to the letter of transmittal are tendered for the account of an eligible guarantor institution. An "eligible guarantor institution" is one of the following firms or other entities identified in Rule 17Ad-15 under the Exchange Act (as the terms are used in Rule 17Ad-15):
If signatures on a letter of transmittal or notice of withdrawal are required to be guaranteed, that guarantee must be made by an eligible institution.
If the letter of transmittal is signed by the holders of Initial Notes tendered thereby, the signatures must correspond with the names as written on the face of the Initial Notes without any change whatsoever. If any of the Initial Notes tendered thereby are held by two or more holders, each holder
78
must sign the letter of transmittal. If any of the Initial Notes tendered thereby are registered in different names on different Initial Notes, it will be necessary to complete, sign and submit as many separate letters of transmittal, and any accompanying documents, as there are different registrations of certificates.
If Initial Notes that are not tendered for exchange pursuant to the Exchange Offer are to be returned to a person other than the tendering holder, certificates for those Initial Notes must be endorsed or accompanied by an appropriate instrument of transfer, signed exactly as the name of the registered owner appears on the certificates, with the signatures on the certificates or instruments of transfer guaranteed by an eligible guarantor institution.
If the letter of transmittal is signed by a person other than the holder of any Initial Notes listed in the letter of transmittal, those Initial Notes must be properly endorsed or accompanied by a properly completed bond power, signed by the holder exactly as the holder's name appears on those Initial Notes. If the letter of transmittal or any Initial Notes, bond powers or other instruments of transfer are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, those persons should so indicate when signing, and, unless waived by us, evidence satisfactory to us of their authority to so act must be submitted with the letter of transmittal.
No alternative, conditional, irregular or contingent tenders will be accepted. By executing the letter of transmittal, or facsimile thereof, the tendering holders of Initial Notes waive any right to receive any notice of the acceptance for exchange of their Initial Notes. Tendering holders should indicate in the applicable box in the letter of transmittal the name and address to which payments and/or substitute certificates evidencing Initial Notes for amounts not tendered or not exchanged are to be issued or sent, if different from the name and address of the person signing the letter of transmittal. If those instructions are not given, Initial Notes not tendered or exchanged will be returned to the tendering holder.
All questions as to the validity, form, eligibility, including time of receipt, and acceptance and withdrawal of tendered Initial Notes will be determined by us in our absolute discretion, which determination will be final and binding. We reserve the absolute right to reject any and all tendered Initial Notes determined by us not to be in proper form or not to be tendered properly or any tendered Initial Notes our acceptance of which would, in the opinion of our counsel, be unlawful. We also reserve the right to waive, in our absolute discretion, any defects, irregularities or conditions of tender as to particular Initial Notes, whether or not waived in the case of other Initial Notes. Our interpretation of the terms and conditions of the Exchange Offer, including the terms and instructions in the letter of transmittal, will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Initial Notes must be cured within the time we determine. Although we intend to notify holders of defects or irregularities with respect to tenders of Initial Notes, neither we, the Exchange Agent nor any other person will be under any duty to give that notification or shall incur any liability for failure to give that notification. Tenders of Initial Notes will not be deemed to have been made until any defects or irregularities therein have been cured or waived.
Any holder whose Initial Notes have been mutilated, lost, stolen or destroyed will be responsible for obtaining replacement securities or for arranging for indemnification with the trustee of the Initial Notes. Holders may contact the Exchange Agent for assistance with these matters.
In addition, we reserve the right, as set forth above under the caption "Conditions to the Exchange Offer", to terminate the Exchange Offer. By tendering, each holder represents and acknowledges to us, among other things, that:
79
restrictions, charges and encumbrances and not subject to any adverse claim when the same are accepted by us;
Withdrawal of Tenders
Tenders of Initial Notes in the Exchange Offer may be validly withdrawn at any time prior to the Expiration Date.
For a withdrawal of a tender to be effective, a written or facsimile transmission notice of withdrawal must be received by the Exchange Agent prior to the Expiration Date at its address set forth below under the caption "Exchange Agent". The withdrawal notice must:
The signature on any notice of withdrawal must be guaranteed by an eligible guarantor institution, unless the Initial Notes have been tendered for the account of an eligible guarantor institution.
Withdrawal of tenders of Initial Notes may not be rescinded, and any Initial Notes validly withdrawn will thereafter be deemed not to have been validly tendered for purposes of the Exchange Offer. Validly withdrawn Initial Notes may, however, be re-tendered by again following one of the procedures described in "Procedures for Tendering" on or prior to the Expiration Date.
80
Exchange Agent
We have appointed Wells Fargo Bank, N.A. as exchange agent in connection with this offer (the "Exchange Agent"). In such capacity, the Exchange Agent has no fiduciary duties to the holders of the Notes and will be acting solely on the basis of our directions. Holders should direct questions, requests for assistance and for additional copies of this prospectus or the letter of transmittal to the Exchange Agent addressed as follows:
Wells
Fargo Bank, N.A.
Corporate Trust Operations
MAC N9303-121
P.O. Box 1517
Minneapolis, Minnesota 55480
(800) 344-5128
Fees and Expenses
We will not make any payment to brokers, dealers or others soliciting acceptances of the Exchange Offer. We will pay certain other expenses to be incurred in connection with the Exchange Offer, including the fees and expenses of the Exchange Agent and certain accountant and legal fees.
Holders who tender their Initial Notes for exchange will not be obligated to pay transfer taxes. If, however:
Accounting Treatment
The Exchange Notes will be recorded at the same carrying value as the Initial Notes as reflected in our accounting records on the date of the exchange. Accordingly, we will not recognize any gain or loss for accounting purposes upon the completion of this offer. The expenses of this offer that we pay will increase our deferred financing costs in accordance with generally accepted accounting principles.
Consequences of Failure to Properly Tender Initial Notes in the Exchange Offer
Issuance of the Exchange Notes in exchange for the Initial Notes under this offer will be made only after timely receipt by the Exchange Agent of a properly completed and duly executed letter of transmittal (or an agent's message from DTC) and the certificate(s) representing such Initial Notes (or confirmation of book-entry transfer), and all other required documents. Therefore, holders of the Initial Notes desiring to tender such Initial Notes in exchange for Exchange Notes should allow sufficient time to ensure timely delivery. We are under no duty to give notification of defects or irregularities of tenders of Initial Notes for exchange or waive any such defects or irregularities. Initial Notes that are not tendered or that are tendered but not accepted by us will, following completion of this offer, continue to be subject to the existing restrictions upon transfer thereof under the Securities
81
Act, and, upon completion of this offer, certain registration rights under the registration rights agreements will terminate.
In the event this offer is completed, we generally will not be required to register the remaining Initial Notes, subject to limited exceptions. Remaining Initial Notes will continue to be subject to the following restrictions on transfer:
We do not currently anticipate that we will register the remaining Initial Notes under the Securities Act. To the extent that Initial Notes are tendered and accepted in connection with this offer, any trading market for remaining Initial Notes could be adversely affected. See "Risk FactorsRisk Factors Relating to the Notes and the Exchange OfferAny Initial Notes that are not exchanged will continue to be restricted securities and may become less liquid."
Neither we nor our board of directors make any recommendation to holders of Initial Notes as to whether to tender or refrain from tendering all or any portion of their Initial Notes pursuant to this offer. Moreover, no one has been authorized to make any such recommendation. Holders of Initial Notes must make their own decision whether to tender pursuant to this offer and, if so, the aggregate amount of Initial Notes to tender, after reading this prospectus and the letter of transmittal and consulting with their advisors, if any, based on their own financial position and requirements.
82
The Global Notes
Initially, the Exchange Notes will be represented by one or more registered notes in global form, without interest coupons (collectively, the "Global Notes"). The Global Notes will be deposited on the issue date with, or on behalf of, DTC and registered in the name of Cede & Co., as nominee of DTC, or will remain with the trustee as custodian for DTC.
Except as set forth below, the Global Notes may be transferred, in whole and not in part, solely to another nominee of DTC or to a successor of DTC or its nominee. Beneficial interests in the Global Notes may not be exchanged for notes in physical, certificated form ("Certificated Notes") except in the limited circumstances described below.
All interests in the Global Notes, including those held through Euroclear Bank S.A., as operator of the Euroclear System ("Euroclear") or Clearstream Banking, S.A. ("Clearstream"), may be subject to the procedures and requirements of DTC. Those interests held through Euroclear or Clearstream may also be subject to the procedures and requirements of such systems.
Certain Book-Entry Procedures for the Global Notes
The descriptions of the operations and procedures of DTC, Euroclear and Clearstream set forth below are provided solely as a matter of convenience. These operations and procedures are solely within the control of the respective settlement systems and are subject to change by them from time to time. We do not take any responsibility for these operations or procedures, and investors are urged to contact the relevant system or its participants directly to discuss these matters.
DTC has advised us that it is:
DTC was created to hold securities for its participants (collectively, the "Participants") and facilitates the clearance and settlement of securities transactions between Participants through electronic book-entry changes to the accounts of its Participants, thereby eliminating the need for physical transfer and delivery of certificates. DTC's Participants include securities brokers and dealers, banks and trust companies, clearing corporations and certain other organizations. Indirect access to DTC's system is also available to other entities such as banks, brokers, dealers and trust companies (collectively, the "Indirect Participants") that clear through or maintain a custodial relationship with a Participant, either directly or indirectly. Investors who are not Participants may beneficially own securities held by or on behalf of DTC only through Participants or Indirect Participants.
We expect that pursuant to procedures established by DTC (1) upon deposit of each Global Note, DTC will credit the accounts of Participants with an interest in the Global Note and (2) ownership of the Notes will be shown on, and the transfer of ownership thereof will be effected only through, records maintained by DTC (with respect to the interests of Participants) and the records of Participants and the Indirect Participants (with respect to the interests of persons other than Participants).
The laws of some jurisdictions may require that certain purchasers of securities take physical delivery of such securities in definitive form. Accordingly, the ability to transfer interests in the Notes
83
represented by a Global Note to such persons may be limited. In addition, because DTC can act only on behalf of its Participants, who in turn act on behalf of persons who hold interests through Participants, the ability of a person having an interest in Notes represented by a Global Note to pledge or transfer such interest to persons or entities that do not participate in DTC's system, or to otherwise take actions in respect of such interest, may be affected by the lack of a physical definitive security in respect of such interest.
So long as DTC or its nominee is the registered owner of a Global Note, DTC or such nominee, as the case may be, will be considered the sole owner or holder of the Notes represented by the Global Notes for all purposes under the indenture. Except as provided below, owners of beneficial interests in a Global Note will not be entitled to have Notes represented by such Global Note registered in their names, will not receive or be entitled to receive physical delivery of Certificated Notes, and will not be considered the owners or holders thereof under the indenture for any purpose, including with respect to the giving of any direction, instruction or approval to the respective trustees thereunder. Accordingly, each holder owning a beneficial interest in a Global Note must rely on the procedures of DTC and, if such holder is not a Participant or an Indirect Participant, on the procedures of the Participant through which such holder owns its interest, to exercise any rights of a holder of Notes under the indenture or such Global Note. We understand that under existing industry practice, in the event that we request any action of holders of Notes, or a holder that is an owner of a beneficial interest in a Global Note desires to take any action that DTC, as the holder of such Global Note, is entitled to take, DTC would authorize the Participants to take such action and the Participants would authorize holders owning through such Participants to take such action or would otherwise act upon the instruction of such holders. Neither we nor the trustee will have any responsibility or liability for any aspect of the records relating to or payments made on account of Notes by DTC, or for maintaining, supervising or reviewing any records of DTC relating to such Notes.
Payments with respect to the principal of, and premium, if any, and interest on, any Notes represented by a Global Note registered in the name of DTC or its nominee on the applicable record date will be payable by the trustee to or at the direction of DTC or its nominee in its capacity as the registered holder of the Global Note representing such Notes under the indenture. Under the terms of the indenture, we and the trustee may treat the persons in whose names the Notes, including the Global Notes, are registered as the owners thereof for the purpose of receiving payment thereon and for any and all other purposes whatsoever. Accordingly, neither we nor the trustee has or will have any responsibility or liability for the payment of such amounts to owners of beneficial interests in a Global Note (including principal, premium, if any, and interest). Payments by the Participants and the Indirect Participants to the owners of beneficial interests in a Global Note will be governed by standing instructions and customary industry practice and will be the responsibility of the Participants or the Indirect Participants and DTC.
Transfers between Participants in DTC will be effected in accordance with DTC's procedures, and will be settled in same-day funds. Transfers between participants in Euroclear or Clearstream will be effected in the ordinary way in accordance with their respective rules and operating procedures.
Cross-market transfers between the Participants in DTC, on the one hand, and Euroclear or Clearstream participants, on the other hand, will be effected through DTC in accordance with DTC's rules on behalf of Euroclear or Clearstream, as the case may be, by its respective depositary; however, such cross-market transactions will require delivery of instructions to Euroclear or Clearstream, as the case may be, by the counterparts in such system in accordance with the rules and procedures and within the established deadlines (Brussels time) of such system. Euroclear or Clearstream, as the case may be, will, if the transaction meets its settlement requirements, deliver instructions to its respective depositary to take action to effect final settlement on its behalf by delivering or receiving interests in the relevant Global Notes in DTC, and making or receiving payment in accordance with normal
84
procedures for same-day funds settlement applicable to DTC. Euroclear participants and Clearstream participants may not deliver instructions directly to the depositories for Euroclear or Clearstream.
Because of time zone differences, the securities account of a Euroclear or Clearstream participant purchasing an interest in a Global Note from a Participant in DTC will be credited, and any such crediting will be reported to the relevant Euroclear or Clearstream participant, during the securities settlement processing day (which must be a business day for Euroclear and Clearstream) immediately following the settlement date of DTC. Cash received in Euroclear or Clearstream as a result of sales of interests in the Global Notes by or through a Euroclear or Clearstream participant to a Participant in DTC will be received with value on the settlement date of DTC but will be available in the relevant Euroclear or Clearstream cash account only as of the business day for Euroclear or Clearstream following DTC's settlement date.
Although DTC, Euroclear and Clearstream have agreed to the foregoing procedures to facilitate transfers of interests in the Global Notes among participants in DTC, Euroclear and Clearstream, they are under no obligation to perform or to continue to perform such procedures, and such procedures may be discontinued at any time. Neither we nor the trustee will have any responsibility for the performance by DTC, Euroclear or Clearstream or their respective participants or indirect participants of their respective obligations under the rules and procedures governing their operations.
Certificated Notes
A Global Note is exchangeable for Certificated Notes if:
In addition, beneficial interests in a Global Note may be exchanged for Certificated Notes upon prior written notice given to the trustee by or on behalf of DTC in accordance with the indenture. In all cases, Certificated Notes delivered in exchange for any Global Note or beneficial interests in Global Notes will be registered in the names, and issued in any approved denominations, requested by or on behalf of the depositary (in accordance with its customary procedures).
Neither we nor the trustee shall be liable for any delay by DTC or any Participant or Indirect Participant in identifying the beneficial owners of the related Notes and each such person may conclusively rely on, and shall be protected in relying on, instructions from DTC for all purposes (including with respect to the registration and delivery, and the respective principal amounts, of the Exchange Notes to be issued).
85
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following discussion summarizes the material U.S. federal income tax considerations relevant to the exchange of Initial Notes for Exchange Notes pursuant to the Exchange Offer and the purchase, ownership and disposition of Notes. This summary only applies to investors that will hold their Notes as "capital assets" under the Code.
This summary is based upon current U.S. federal income tax law, which is subject to change or differing interpretations, possibly with retroactive effect. This summary does not discuss all aspects of U.S. federal income taxation that may be important to particular investors in light of their individual circumstances, such as investors subject to special tax rules (e.g., financial institutions, insurance companies, expatriates, broker-dealers, REITs, regulated investment companies, traders in securities who elect a mark-to-market method of accounting, tax-exempt organizations, persons that will hold the Notes as a part of a straddle, hedge, conversion, constructive sale or other integrated transaction for U.S. federal income tax purposes, entities treated as partnerships for U.S. federal income tax purposes or investors therein, persons subject to alternative minimum tax or U.S. Holders (as defined below) that have a "functional currency" other than the U.S. dollar), all of whom may be subject to tax rules that differ materially from those summarized below. In addition, this summary does not discuss any U.S. federal tax laws other than U.S. federal income tax laws (such as estate or gift tax laws or the Medicare tax on certain investment income) or any foreign, state or local tax considerations. We are not planning to seek a ruling from the IRS regarding the U.S. federal income tax consequences of the purchase, ownership or disposition of the Notes. Accordingly, there can be no assurance that the IRS will not successfully challenge one or more of the conclusions stated herein. Each holder of Initial Notes considering this Exchange Offer should consult its own tax advisor regarding the tax consequences of the Exchange Offer to it, including those under state, foreign and other tax laws and other federal income tax consequences of the purchase, ownership or disposition of the Notes.
For purposes of this summary, a "U.S. Holder" is a beneficial owner of a Note that is, for U.S. federal income tax purposes, (1) an individual who is a citizen or resident of the United States, (2) a corporation created or organized under the laws of the United States, any state thereof or the District of Columbia, (3) an estate, the income of which is subject to U.S. federal income tax regardless of its source or (4) a trust, if (a) a U.S. court can exercise primary supervision over the administration of the trust and one or more "United States persons" within the meaning of the Code control all substantial trust decisions or (b) the trust has a valid election in effect under applicable U.S. Treasury regulations to be treated as a United States person. A beneficial owner of a Note that for U.S. federal income tax purposes is an individual, corporation, estate or trust that is not a U.S. Holder is referred to herein as a "Non-U.S. Holder."
If an entity treated as a partnership for U.S. federal income tax purposes is a beneficial owner of Notes, the tax treatment of a partner in the partnership generally will depend upon the status of the partner and the activities of the partnership. A partnership holding Notes, and partners in such a partnership, are urged to consult their tax advisors.
Exchange of the Initial Notes for Exchange Notes
An exchange of Initial Notes for Exchange Notes pursuant to the Exchange Offer will not be treated as a taxable exchange or other taxable event for U.S. federal income tax purposes. Accordingly, there will be no U.S. federal income tax consequences to holders who exchange their Initial Notes for Exchange Notes in connection with the Exchange Offer and any such holder will have the same adjusted tax basis and holding period in the Exchange Notes as it had in the Initial Notes immediately before the exchange.
86
U.S. Holders
Stated Interest. Interest on a Note will generally be taxable to a U.S. Holder as ordinary interest income at the time it is paid or accrued, in accordance with the U.S. Holder's regular method of tax accounting for U.S. federal income tax purposes.
Market Discount. If a U.S. Holder acquires a Note at a cost that is less than its stated redemption price at maturity (i.e., its stated principal amount), the amount of such difference is treated as "market discount" for U.S. federal income tax purposes, unless such difference is less than .0025 multiplied by the stated redemption price at maturity multiplied by the number of complete years to maturity (from the date of acquisition).
Under the market discount rules of the Code, a U.S. Holder is required to treat any partial payment of principal on a Note, and any gain on the sale, exchange, retirement or other disposition of a Note, as ordinary income to the extent of the accrued market discount that has not previously been included in income. If a U.S. Holder disposes of a Note with market discount in certain otherwise nontaxable transactions, such holder must include accrued market discount as ordinary income as if the holder had sold the Note at its then fair market value.
In general, the amount of market discount that has accrued is determined on a ratable basis. A U.S. Holder may, however, elect to determine the amount of accrued market discount on a constant yield to maturity basis. This election is made on a note-by-note basis and is irrevocable.
With respect to Notes with market discount, a U.S. Holder may not be allowed to deduct immediately a portion of the interest expense on any indebtedness incurred or continued to purchase or to carry the Notes. A U.S. Holder may elect to include market discount in income currently as it accrues, in which case the interest deferral rule set forth in the preceding sentence will not apply. This election will apply to all debt instruments acquired by the U.S. Holder on or after the first day of the first taxable year to which the election applies and is irrevocable without the consent of the IRS. A U.S. Holder's tax basis in a Note will be increased by the amount of market discount included in the holder's income under the election.
Amortizable Bond Premium. If a U.S. Holder purchases a Note for an amount in excess of the stated redemption price at maturity, the holder will be considered to have purchased the Note with "amortizable bond premium" equal in amount to the excess. Generally, a U.S. Holder may elect to amortize the premium as an offset to interest income otherwise required to be included in income in respect of the Note during the taxable year, using a constant yield method similar to that described above, over the remaining term of the Note. Under Treasury Regulations, the amount of amortizable bond premium that a U.S. Holder may deduct in any accrual period is limited to the amount by which the holder's total interest inclusions on the Note in prior accrual periods exceed the total amount treated by the holder as a bond premium deduction in prior accrual periods. If any of the excess bond premium is not deductible, that amount is carried forward to the next accrual period. A U.S. Holder who elects to amortize bond premium must reduce the holder's tax basis in the Note by the amount of the premium used to offset interest income as set forth above. An election to amortize bond premium applies to all taxable debt obligations then owned and thereafter acquired by the U.S. Holder and may be revoked only with the consent of the IRS.
Election of Constant Yield Method. U.S. Holders may elect to include in gross income all interest that accrues on a Note, including any stated interest, market discount, de minimis market discount and unstated interest, as adjusted by amortizable bond premium, by using a constant yield prescribed in the Code and applicable Treasury Regulations. This election for a Note with amortizable bond premium will result in a deemed election to amortize bond premium for all taxable debt obligations held or subsequently acquired by the U.S. Holder on or after the first day of the first taxable year to which the election applies and may be revoked only with the consent of the IRS. Similarly, this election for a
87
Note with market discount will result in a deemed election to accrue market discount in income currently for the Note and for all other debt instruments acquired by the U.S. Holder with market discount on or after the first day of the taxable year to which the election first applies, and may be revoked only with the consent of the IRS. A U.S. Holder's tax basis in a Note will be increased by each accrual of income under the constant yield election described in this paragraph.
Sale, Exchange, Retirement, Redemption or Other Taxable Disposition of the Notes. Upon a sale, exchange, retirement, redemption or other taxable disposition of Notes, a U.S. Holder generally will recognize gain or loss in an amount equal to the difference, if any, between the amount realized on the disposition and the U.S. Holder's adjusted tax basis in such Notes. The amount realized will include the amount of any cash and the fair market value of any property received for the Notes (other than any amount attributable to accrued but unpaid interest, which will be taxable as ordinary income (as described above under "Stated Interest") to the extent not previously included in income). A U.S. Holder's adjusted tax basis in a Note generally will be equal to the cost of the Note to such U.S. Holder, increased by the amount of any market discount previously included in gross income and reduced by the amount of any amortizable bond premium applied to reduce, or allowed as a deduction against, interest on a Note. Any such gain or loss generally will be capital gain or loss (except with respect to accrued market discount not previously included in income, which will be taxable as ordinary income), and will be long-term capital gain or loss if the U.S. Holder's holding period for the Note is more than one year at the time of disposition. For non-corporate U.S. Holders, long-term capital gain generally will be subject to reduced rates of taxation. The deductibility of capital losses is subject to certain limitations.
Non-U.S. Holders
Interest. Subject to the discussion below concerning backup withholding and FATCA, all payments of interest on the Notes made to a Non-U.S. Holder will be exempt from U.S. federal income and withholding tax; provided that: (1) such Non-U.S. Holder does not own, actually or constructively, 10% or more of the capital or profits interest in the operating partnership, (2) such Non-U.S. Holder is not a controlled foreign corporation with respect to which the operating partnership is a "related person" (within the meaning of Section 864(d)(4) of the Code), (3) the beneficial owner of the Notes certifies, under penalties of perjury, to us or our paying agent on IRS Form W-8BEN or W-8BEN-E (or appropriate substitute form) that it is not a U.S. person and provides certain other information or satisfies certain other certification requirements and (4) such payments are not effectively connected with such Non-U.S. Holder's conduct of a trade or business in the United States.
If a Non-U.S. Holder cannot satisfy the requirements described above, payments of interest will be subject to a 30% U.S. federal withholding tax, unless such Non-U.S. Holder provides us with a properly executed (1) IRS Form W-8BEN or W-8BEN-E (or appropriate substitute form) claiming an exemption from or reduction in withholding under the benefit of an applicable income tax treaty or (2) IRS Form W-8ECI (or appropriate substitute form) stating that interest paid or accrued on the Notes is not subject to withholding tax because it is effectively connected with the conduct of a trade or business in the United States and is includible in such Non-U.S. Holder's gross income.
Sale, Exchange, Retirement, Redemption or Other Taxable Disposition of the Notes. Subject to the discussion below concerning backup withholding and FATCA and except with respect to accrued but unpaid interest, which generally will be taxable as interest and may be subject to the rules described above under "Non-U.S. HoldersInterest," a Non-U.S. Holder generally will not be subject to U.S. federal income or withholding tax on the receipt of payments of principal on a Note, or on any gain recognized upon the sale, exchange, retirement, redemption or other taxable disposition of a Note, unless in the case of gain (1) such gain is effectively connected with the conduct by such Non-U.S. Holder of a trade or business within the United States, in which case such gain will be taxed as described below under "Non-U.S. HoldersIncome Effectively Connected with a U.S. Trade or
88
Business," or (2) such Non-U.S. Holder is an individual who is present in the United States for 183 days or more in the taxable year of disposition, and certain other conditions are met, in which case such Non-U.S. Holder will be subject to tax at 30% (or, if applicable, a lower treaty rate) on the gain derived from such disposition, which may be offset by U.S. source capital losses.
Income Effectively Connected with a U.S. Trade or Business. If a Non-U.S. Holder of Notes is engaged in a trade or business in the United States, and if interest on the Notes or gain realized on the sale, exchange, retirement, redemption or other taxable disposition of the Notes is effectively connected with the conduct of such trade or business, the Non-U.S. Holder generally will be subject to regular U.S. federal income tax on such income or gain in the same manner as if the Non-U.S. Holder were a U.S. Holder. If the Non-U.S. Holder is eligible for the benefits of an income tax treaty between the United States and the Non-U.S. Holder's country of residence, any "effectively connected" income or gain generally will be subject to U.S. federal income tax only if it is also attributable to a permanent establishment or fixed base maintained by the Non-U.S. Holder in the United States. In addition, if such a Non-U.S. Holder is a foreign corporation, such holder may also be subject to a branch profits tax equal to 30% (or such lower rate provided by an applicable income tax treaty) of its effectively connected earnings and profits, subject to certain adjustments. Payments of interest that are effectively connected with a U.S. trade or business will not be subject to the 30% U.S. federal withholding tax provided that the Non-U.S. Holder claims exemption from withholding. To claim exemption from withholding, the Non-U.S. Holder must certify its qualification, which generally can be done by providing a properly executed IRS Form W-8ECI (or other applicable form).
Information Reporting and Backup Withholding
U.S. Holders. Payments of interest on, or the proceeds of the sale, exchange, retirement, redemption or other taxable disposition of, a Note are generally subject to information reporting unless the U.S. Holder is an exempt recipient (such as a corporation). Such payments may also be subject to U.S. federal backup withholding at a 28% rate, if the recipient of such payment fails to supply a taxpayer identification number, certified under penalties of perjury, as well as certain other information or otherwise fails to establish an exemption from backup withholding. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules will be allowed as a refund or credit against that U.S. Holder's U.S. federal income tax liability provided the required information is timely furnished to the IRS.
Non-U.S. Holders. A Non-U.S. Holder may be required to comply with certain certification procedures to establish that the holder is not a United States person in order to avoid backup withholding at a 28% rate, with respect to payments of interest on, or the proceeds of the sale, exchange, retirement, redemption or other disposition of, a Note. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against that Non-U.S. Holder's U.S. federal income tax liability provided the required information is timely furnished to the IRS. In certain circumstances, the name and address of the beneficial owner and the amount of interest paid on a Note, as well as the amount, if any, withheld, may be reported to the IRS. Copies of these information returns may also be made available under the provisions of a specific treaty or agreement to the tax authorities of the country in which the Non-U.S. Holder resides.
FATCA
Pursuant to Sections 1471 through 1474 of the Code ("FATCA"), withholding at a rate of 30% may be required on payments of interest on, and, beginning on January 1, 2019, gross proceeds from the sale, exchange, retirement, redemption or other taxable disposition of, a Note paid to non-U.S. financial institutions and certain other non-U.S. entities, unless they satisfy certain reporting requirements. Holders of Notes are urged to consult their tax advisors regarding to the possible implications of FATCA on their investment in Notes.
89
Each broker-dealer that receives Exchange Notes in exchange for Initial Notes acquired for its own account as a result of market-making or other trading activities pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of such Exchange Notes. We have agreed that, during the period described in Section 4(a)(3) of the Securities Act and Rule 174 thereunder that is applicable to transactions by brokers or dealers with respect to Exchange Notes (the "Applicable Period"), we will use our commercially reasonable efforts to make this prospectus, as amended and supplemented, available to broker-dealers for use in connection with resales of Exchange Notes.
We will not receive any proceeds from any sale of Exchange Notes by broker-dealers. Exchange Notes received by broker-dealers for their own account pursuant to this offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the Exchange Notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or at negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer and/or the purchasers of any such Exchange Notes. Any broker-dealer that resells Exchange Notes that were received by it for its own account pursuant to this offer and any broker or dealer that participates in a distribution of such Exchange Notes may be deemed to be an "underwriter" within the meaning of the Securities Act, and any profit of any such resale of Exchange Notes and any commissions or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The letter of transmittal states that by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act.
This Exchange Offer is being made by the Issuers based upon the Issuers' understanding of interpretations by the staff of the SEC, as set forth in no-action letters issued to third parties, that the Exchange Notes issued in exchange for the Initial Notes pursuant to the Exchange Offer may be offered for resale, resold and otherwise transferred by holders thereof, without compliance with the registration and prospectus delivery provisions of the Securities Act; provided that: (i) such holder is not an "affiliate", as defined in Rule 405 under the Securities Act, of the Issuers; (ii) such Exchange Notes are acquired in the ordinary course of such holder's business; and (iii) such holder is not engaged in, does not intend to engage in, a distribution of such Exchange Notes and has no arrangement or understanding with any person to participate in a distribution, as defined in the Securities Act, of the Exchange Notes.
However, the Issuers have not sought their own no-action letter and therefore the staff of the SEC has not considered this Exchange Offer in the context of a no-action letter. There can be no assurance that the staff of the SEC would make a similar determination with respect to the Exchange Offer as in other circumstances. If a holder of Initial Notes is an affiliate of the Issuers, acquires the Exchange Notes other than in the ordinary course of such holder's business or is engaged in or intends to engage in a distribution of the Exchange Notes or has any arrangement or understanding with respect to the distribution of the Exchange Notes to be acquired pursuant to the Exchange Offer, such holder could not rely on the applicable interpretations of the staff of the SEC and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any secondary resale transaction.
During the Applicable Period, we will send additional copies of this prospectus and any amendment or supplement to this prospectus to any broker-dealer that requests such documents in the letter of transmittal. We have agreed to pay all expenses incident to this offer other than commissions or concessions of any brokers or dealers and will indemnify the holders of the Notes (including broker-dealers selling Exchange Notes during the Applicable Period) against certain liabilities, including liabilities under the Securities Act.
90
The validity of the Exchange Notes will be passed upon for us by Cravath, Swaine & Moore, LLP. Venable LLP will issue an opinion to us regarding certain matters of Maryland law.
The consolidated financial statements, and the related financial statement schedules of CyrusOne Inc. and its subsidiaries (the "Company"), incorporated in this prospectus by reference from the Company's Annual Report on Form 10-K for the year ended December 31, 2014, and the effectiveness of the Company's internal control over financial reporting have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their reports (which reports (1) express an unqualified opinion on the financial statements and financial statement schedules and includes an explanatory paragraph regarding the allocation of certain corporate overhead expenses from Cincinnati Bell Inc. and (2) express an unqualified opinion on the effectiveness of internal control over financial reporting), which are incorporated herein by reference. Such financial statements and financial statement schedules have been so incorporated in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing.
The consolidated financial statements, and the related financial statement schedules of CyrusOne LP and its subsidiaries (the "Partnership"), incorporated in this prospectus by reference from the Partnership's Annual Report on Form 10-K for the year ended December 31, 2014, have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report (which report expresses an unqualified opinion and includes an explanatory paragraph regarding the allocation of certain corporate overhead expenses from Cincinnati Bell Inc.), which is incorporated herein by reference. Such financial statements and financial statement schedules have been so incorporated in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.
The consolidated financial statements, and the related financial statement schedules of Cervalis Holdings LLC, incorporated in this prospectus by reference from the Company's Current Report on Form 8-K dated June 22, 2015, have been audited by RSM US LLP (formerly McGladrey LLP), an independent auditor, pursuant to their report, which is incorporated herein by reference. Such financial statements and financial statement schedules have been so incorporated in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.
91
Until February 22, 2016, all dealers that effect transactions in these securities, whether or not participating in this offer, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotment or subscriptions.
CyrusOne LP
CyrusOne Finance Corp
Offer to Exchange
Up to $100,000,000 Principal Amount of
6.375% Senior Notes due 2022
for
a Like Principal Amount of
6.375% Senior Notes due 2022
which have been registered under the Securities Act of 1933
PROSPECTUS
November 23, 2015