Hersha Hospitality to close on $400 million senior unsecured facility

By Marisa Wong

Madison, Wis., Oct. 31 - Hersha Hospitality Trust said its operating partnership, Hersha Hospitality LP, received commitments for a $400 million senior unsecured credit facility that is expandable to $550 million.

The credit facility will consist of a $250 million senior unsecured revolving line of credit and an up to $150 million senior unsecured term loan. The facility is expected to close within the next 30 days.

The unsecured facility will replace the company's $250 million senior secured revolving credit facility.

Interest for the new facility will equal Libor plus 175 basis points to 265 bps, based on the company's leverage ratio for an all-in rate, inclusive of swaps, of 2.6% to 3.5%.

The revolver is set to mature three years from the closing date with a one-year extension option.

The term loan will be funded as a single draw of $100 million on the closing date. Up to $50 million will be available on a delayed draw basis for up to 60 days after the closing date.

The term loan is set to mature three years from the closing date with two one-year extension options.

Proceeds from the term loan's initial advance will be used to pay off the existing balance on the secured revolver, to pay off the balance on mortgage loans at eight hotel properties and for general corporate purposes. The mortgage loans being paid off have an outstanding balance of $102 million and a weighted average interest rate of 5.2% as of Sept. 30.

"We are encouraged by our ability to access the debt capital markets and the support of our bank group. The new facility will meaningfully strengthen our balance sheet and provide us with greater financial flexibility," Hersha chief financial officer Ashish R. Parikh said in a press release.

"This transaction will significantly reduce our weighted average cost of debt and enhance our liquidity position by over half a billion dollars. By eliminating the floor pricing on our existing secured credit facility and refinancing existing mortgage debt with the new term loan, we estimate a reduction of interest expense of approximately $2.5 million on an annual basis.

"Furthermore, our access to unsecured debt financing will reduce our reliance on the secured debt markets, further validating the quality of our portfolio and the conservative balance sheet strategy we have undertaken."

The facility is being arranged by Citigroup Global Markets Inc. and Wells Fargo Securities, LLC, as joint lead arrangers and bookrunners. Bank of America, NA, Manufacturers and Traders Trust Co., Raymond James Bank, NA and TD Bank, NA will act as co-documentation agents.

Hersha is a Philadelphia-based real estate investment trust. The company owns hotels in major urban areas including New York, Washington, Boston, Philadelphia, Los Angeles and Miami.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.