Wells Fargo Securities, BofA Securities, PNC Capital Markets and RBC Capital Markets acted as joint lead arrangers and joint lead bookrunners on an amendment to Service Properties Trust‘s $1.4 billion credit agreement.
Wells Fargo is the administrative agent. Bank of America, PNC Bank and Royal Bank of Canada are the syndication agents.
The amendment provides a waiver of all existing financial covenants under SVC’s credit agreement through July 15, 2022, during which, subject to certain conditions, SVC will continue to have access to undrawn amounts under the revolving credit facility.
In connection with the amended credit agreement, SVC repaid its $400 million term loan on Nov. 5, 2020, using undrawn amounts under its revolving credit facility.
The key terms of the amended credit agreement include:
- All existing financial covenants have been waived through the end of the agreement term, or July 15, 2022, or the new waiver period.
- SVC pledged certain additional equity interests of subsidiaries owning properties with an undepreciated book value of, together with the existing pledged equity interests, $1.8 billion as of Sept. 30, 2020. Following the closing of the amendment, SVC will provide first mortgage liens on 74 properties owned by the pledging subsidiaries to secure its obligations under the credit agreement. These properties include 62 travel centers in 26 states and 12 hotels in nine states with aggregate gross book values of $1.2 billion and $641 million, respectively, as of Sept. 30, 2020.
- SVC has the ability to fund up to $250 million of capital expenditures per year and up to $50 million of certain other investments per year as defined in the credit agreement.
- The interest rate premium over LIBOR under SVC’s revolving credit facility increased by 30 basis points.
- Certain covenants and restrictions on distributions to common shareholders, share repurchases, incurring indebtedness and acquiring real property (in each case subject to various exceptions), and the minimum liquidity requirement of $125 million, will remain in place during the new waiver period.
- SVC is generally required to apply the net cash proceeds from the disposition of assets, capital markets transactions and debt refinancing to the repayment of outstanding loans under the credit agreement, and then to other debt maturities.
“We very much appreciate the efforts of our participating lenders who worked with us to execute this amendment, which enhances our financial flexibility. This amendment assures our continued access to undrawn amounts under our revolving credit facility and we believe provides us sufficient liquidity to fund our ongoing capital requirements at least through 2022. We believe the increased costs and restrictions agreed to as part of this amendment, including providing collateral, were necessary in the current environment,” Brian Donley, treasurer and CFO at SVC, said.
Service Properties Trust is a real estate investment trust.