Business Context and Reporting Period
RLJ Lodging Trust filed a Form 8-K on June 20, 2011, reporting the entry into a material definitive agreement. The filing details a new unsecured credit facility entered into by the Company and its Operating Partnership with Wells Fargo Bank National Association as the Administrative Agent.
Key Financial Metrics and Facility Details
- Credit Facility Size: Initial aggregate principal amount of $300 million.
- Facility Type: Revolving credit facility with a scheduled maturity of June 20, 2014, and a one-year extension option.
- Availability: As of June 20, 2011, the full $300 million was available; no borrowings were outstanding as of June 23, 2011.
- Expansion Option: The commitment may be increased to $450 million subject to lender commitments.
- Sub-facilities: Up to $30 million for letters of credit and up to $40 million for swingline loans.
- Interest Rate: LIBOR plus 225 to 325 basis points, based on the total leverage ratio.
- Unused Fee: 30 to 40 basis points on unused portions.
Material Changes and Covenants
The filing establishes new financial covenants that the Company must satisfy to maintain borrowing capacity. Key ratios include:
- Total Debt to EBITDA: Maximum 6.5 to 1.0 (reducing to 6.0 to 1.0 after June 30, 2012).
- Adjusted EBITDA to Fixed Charges: Minimum 1.40 to 1.0 (increasing to 1.50 to 1.0 after September 30, 2012).
- Secured Indebtedness to Total Asset Value: Maximum 55% (reducing to 50% in 2013 and 45% thereafter).
- Tangible Net Worth: Minimum of $1,528,025,000 (plus 75% of net proceeds from future equity issuances).
- Unencumbered Pool Coverage: Borrowing base limited to 55% of the value of the unencumbered pool of hotel properties.
Use of Proceeds and Outlook
Proceeds from the credit facility are designated for:
- Payment of redevelopment and development costs for hotel properties.
- Financing hotel acquisitions.
- Capital expenditures, dividends, and debt repayment.
- General working capital and corporate purposes.
The filing does not provide specific revenue, profit, or cash flow figures for the period, nor does it contain forward-looking guidance beyond the terms of the credit agreement.
Investor Verification Checklist
- Verify the current status of the $300 million facility and any subsequent drawdowns.
- Confirm compliance with the 6.5 to 1.0 Total Debt to EBITDA covenant in subsequent quarterly reports.
- Monitor the composition of the "Unencumbered Pool" of assets to assess borrowing capacity limits.
- Review future filings for any exercise of the $150 million expansion option or the one-year maturity extension.
- Check for any amendments to the interest rate spread (LIBOR + 225/325 bps) based on leverage ratio changes.