New York, Dec. 5 - Host Marriott Corp. said it amended its bank credit facility to take into account the impact of the economic recession and the Sept. 11 terrorist attacks.
The change gives the Bethesda, Md. real estate investment trust more flexibility under its financial covenants through Aug. 15, 2002 although it warned that it does not expect to comply with covenants after that date and will need another amendment to avoid defaulting on the facility.
Currently Host Marriott is in compliance with its covenants, the company said in a filing with the Securities and Exchange Commission reporting the amendment.
Under the amendment, effective Nov. 19, Host Marriott will see draws on its revolving facility limited to $50 million in the first quarter of 2002. In the second quarter, draws will be limited to $25 million, with this amount further reduced by any first-quarter draws that remain outstanding.
Interest rates rise 25 to 75 basis points, depending on leverage levels. Pricing is set by a grid, with the previous highest leverage ratio being 5.25:1.00 or higher. There are now two new bands, with Host Marriott paying an extra 25 basis points at leverage of over 5.50:1.00 and an extra 75 basis points over 6.50:1.00.0
Host Marriott will also be restricted in its ability to pay dividends on its capital stock and QUIPS through Aug. 15, 2002 unless those payments are necessary to maintain REIT status for tax purposes or the company is below certain leverage levels. The company said in the SEC filing that it anticipates it will be able to pay dividends on the preferreds but not the common stock through Aug. 15, 2002.
Host Marriott also said that for periods of four quarters ending after March 31, 2002 it will likely not meet the 2.0 times interest coverage ratio test in the senior notes indenture. Although not a default, this would restrict Host Marriott's ability to make payments. The company said it intends to pay dividends on its preferred and common stock necessary to maintain its REIT status, as permitted in the indenture.
Any insurance proceeds for Marriott's World Trade Center hotel will be kept in a separate account and either used to rebuild or pay down the credit facility.
Host Marriott's credit facility is with Bankers Trust Co. as administrative agent.
The new consolidated interest coverage and unsecured interest coverage covenant sets the following minimum levels (interest coverage is at the end of each quarter, maximum leverage is at any point during the quarter):
| Quarter ending | Consolidated interest | Unsecured interest | Maximum
|
| coverage ratio | coverage ratio | leverage
|
| Sept. 30, 2001 | 2.15:1.00 | 1.80:1.00
|
| Dec. 31, 2001 | 1.75:1.00 | 1.55:1.00 | 5.50:1.00
|
| March 31, 2002 | 1.60:1.00 | 1.40:1.00 | 6.50:1.00
|
| June 30, 2002 | 1.50:1.00 | 1.30:1.00 | 7.40:1.00
|
| After that | 2.15:1.00 | 1.80:1.00 | 7.25:1.00 to Aug. 15, 2002
|
| 5.50:1.00 after that
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| The covenants also fix a minimum consolidated fixed charge coverage ratio of 1.40:1.00 for the quarter ending Sept. 30, 2001, for the quarter ending Sept. 30, 2002 and each quarter after that.
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| End
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