Park Hotels & Resorts Revamps Credit Facilities
- May 11, 2020
Park Hotels & Resorts Inc., of Tysons, Va., has agreed to amend its $1.0 billion fully drawn revolving credit facility, $700 million term loan and $670 million term loan.
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The credit amendments waive the existing quarterly tested financial covenants through March 31, 2021, and extend the maturity of the revolving credit facility from December 2020 to December 2021. They also adjust certain financial covenants to revised levels for temporary periods starting in the second fiscal quarter of 2021, that is, once quarterly testing of financial covenants resumes.
On the other side of the ledger:
- Park is now required to maintain minimum liquidity of $200 million.
- Park has provided guarantees by certain Park-affiliated entities and pledges of equity interests in Park-affiliated entities owning certain unencumbered assets during the waiver period and until the ratio of net debt to EBITDA falls below 6.50x.
- The interest rate for each facility is increased to the highest leverage-based margins for the duration of the waiver period.
- A LIBOR floor of 25 basis points has been added to the variable interest rate calculation for both facilities.
- Certain restrictions and covenants have been added for the duration of the waiver period, including restrictions on dividend and distribution payments and share repurchases.
With these amended credit agreements, Park Chairman & CEO Thomas Baltimore Jr. said in a prepared statement, the company “is well positioned to weather this difficult period for an extended period of time.” Park Hotels did not reply to Commercial Property Executive’s request for additional information.
Strong enough for a grim time?
It was just a year ago that Park announced plans to merge with Chesapeake Lodging Trust in a deal worth about $2.7 billion. Last fall, Bank of America ponied up a $950 million loan to help Park Hotels close the merger. More recently, Park has sold off properties in Los Angeles for $117 million and in Washington, D.C., and Sao Paulo, Brazil, for a combined $208 million. The latter sale marked the REIT’s exit from non-U.S. markets.
As the pandemic continues to bedevil individuals, societies and economies worldwide, data from the U.S. Travel Association points toward hospitality-related direct job losses in the millions in this country. Economic losses in the lodging sector, which could be one of the industries hardest hit by the coronavirus epidemic, are projected to potentially exceed $400 billion for the year.