Barclays Bank, Regions Capital Markets, Citibank, US Bank, Wells Fargo Bank, Bank of America, Citizens Bank and BMO Harris Bank are serving as participating lenders for an amendment to Chatham Lodging Trust’s $250 million revolving credit facility.
Key terms of the amendment, which are applicable during the waiver period, include:
- Waiver of key financial covenants through March 31, 2021
- The allowance for full utilization of entire $250 million credit facility
- Applicable margin on borrowings set at LIBOR plus 250 basis points if borrowings on the credit facility are under $200 million and LIBOR plus 300 basis points if borrowings are more than $200 million
- LIBOR floor is set at 50 basis points
- The applicable margin was set to increase to 225 basis points
- Equity pledges on the 18 borrowing base assets
- Required maintenance of a minimum liquidity of $25 million whether in cash or available capacity under the credit facility
- Certain limitations on the incurrence of additional indebtedness
- The allowance of common share dividends, which are limited to 100% of REIT taxable income, and any dividends paid would include a cash component no greater than the minimum percentage allowed under the Internal Revenue Code
At March 31, 2020, Chatham had $173 million drawn on the credit facility. With this amendment, Chatham has estimated liquidity of $135 million, including cash of approximately $58 million as of March 31, 2020, and remaining borrowing capacity on the credit facility of $77 million. Additionally, Chatham has six unencumbered hotels with a total aggregate investment of $276 million as of March 31, 2020.
On a pro forma basis as of March 31, 2020, assuming the $250 million facility is fully drawn plus $495 million of outstanding secured debt, the company’s pro forma leverage would be 40% based on the ratio of the company’s pro forma net debt to hotel investments at cost.
Chatham’s current estimate of monthly cash flow after debt service and before capital expenditures is projected based on certain revenue per available room (RevPAR) levels (April RevPAR was approximately $24) and does not include any payments related to its Warner Center development, which was temporarily slowed due to restrictions related to COVID-19.
“We very much appreciate the collaborative efforts of our participating lenders who worked with us to execute this amendment, further solidifying our financial position,” Jeremy Wegner, CFO of Chatham Lodging Trust, said. “Going into this crisis, we maintained a conservative balance sheet with reasonable leverage and a mere $13 million of debt maturing before 2023. This amendment allows us to utilize the remaining committed capacity under our credit facility should it be necessary, and provides ample liquidity and flexibility to weather the adverse effects on cash flow resulting from COVID-19.”
Chatham Lodging Trust is a hotel real estate investment trust (REIT) focused on investing in hotels. The company owns 134 hotels wholly or through joint ventures.