Business Context and Reporting Period
This Form 8-K was filed by Apple REIT Nine, Inc. on May 15, 2012. The filing reports a material event under Item 8.01 (Other Events) regarding the execution of a new credit facility.
Key Financial Metrics
The filing discloses the following specific financial terms regarding the new debt instrument:
- Debt Facility: $30 million credit facility.
- Lender: Bank of America, N.A.
- Maturity Date: November 15, 2012.
- Interest Rate: Daily LIBOR plus 2.75% (payable quarterly).
- Prepayment Terms: Voluntary prepayments allowed in whole or in part at any time.
- Collateral: Secured by assets of Glade M. Knight (Chairman and CEO), who provided a personal guaranty without consideration.
The filing text does not provide clear values for revenue, profit, cash flow, margins, or overall liquidity positions outside of this specific transaction.
Material Changes
The primary material change is the establishment of a new $30 million short-term debt obligation. Proceeds are designated for general working capital, including the planned purchase of a hotel, capital expenditures, distributions, and redemptions.
Outlook, Risks, and Management Commentary
Management indicates the loan will support immediate operational needs and strategic acquisitions (hotel purchase). The agreement includes standard representations, covenants, events of default, and remedies. A key contingency is the personal guarantee provided by the CEO, which secures the facility but involves no direct compensation to the guarantor.
Investor Verification Checklist
- Verify the company's ability to repay the $30 million facility by the November 15, 2012 maturity date.
- Confirm the status of the planned hotel purchase and whether proceeds are being utilized as intended.
- Review the specific covenants and events of default detailed in the full Loan Agreement.
- Assess the impact of the personal guarantee by the CEO on corporate governance and risk exposure.