Apple Hospitality REIT, Inc. - Form 8-K Summary
Business Context and Reporting Period
This Current Report on Form 8-K was filed by Apple Hospitality REIT, Inc. on July 27, 2018. The filing details the entry into a material definitive agreement involving the amendment and restatement of the Company's credit facility.
Key Financial Metrics and Debt Structure
The Company entered into a new Credit Agreement with a total facility size of $850 million, reduced from the previous $965 million. The facility structure includes:
- Term Loan 1: $200 million maturing July 27, 2023.
- Term Loan 2: $225 million maturing January 31, 2024.
- Revolving Credit Facility: $425 million with an initial maturity of July 27, 2022 (extendable by one year).
Interest and Fees:
- Interest rate: LIBOR plus a margin of 1.35% to 2.25% based on leverage ratio.
- Unused fee: Reduced to 0.20% or 0.25% per annum on the unused portion of the revolving facility.
Cash Flow Activity at Closing:
- Borrowed $425 million under term loans to repay prior term loans.
- Borrowed $196 million under the revolving facility to repay prior balances and pay closing costs.
Financial Covenants:
- Total Debt to EBITDA: Maximum 6.50 to 1.00.
- Secured Debt to Total Assets: Maximum 45%.
- Minimum Tangible Net Worth: $3.2 billion (plus 75% of net equity proceeds).
- Adjusted EBITDA to Fixed Charges: Minimum 1.50 to 1.00.
- Unsecured Indebtedness to Unencumbered Asset Value: Maximum 60%.
Material Changes Versus Prior Period
Compared to the previous $965 million credit agreement, the new agreement features:
- A reduction in total facility capacity from $965 million to $850 million.
- A slight decrease in the interest rate margin.
- A reduction in the unused fee on the revolving facility.
- An option to increase the total facility to $1.25 billion subject to conditions.
Outlook, Risks, and Contingencies
The Credit Agreement contains customary affirmative and negative covenants restricting liens, indebtedness, investments, mergers, and asset sales. Failure to comply with financial maintenance covenants or other terms could result in an event of default, permitting lenders to declare all obligations immediately due and payable. The filing does not provide specific revenue, profit, or cash flow guidance for future periods.
Key Facts for Investor Verification
- Verify the Company's current leverage ratio to ensure compliance with the 6.50x Debt-to-EBITDA covenant.
- Confirm the Company's tangible net worth meets the $3.2 billion minimum threshold.
- Review the full terms of the Credit Agreement (Exhibit 10.1) for specific definitions of EBITDA and fixed charges.
- Monitor the utilization of the $425 million revolving facility and the associated unused fees.
- Assess the impact of the reduced total facility size ($850 million) on future liquidity and expansion plans.