RLJ Lodging details restated revolver and five-, seven-year term loans

By Marisa Wong

Madison, Wis., Nov. 27 - RLJ Lodging Trust disclosed more information on its unsecured credit agreement in an 8-K filed Tuesday with the Securities and Exchange Commission.

On Nov. 20 RLJ closed on a credit facility that amends and restates the company's previous credit facility dated June 20, 2011. The amended facility consists of a $300 million revolver due Nov. 20, 2016 and a $275 million term loan due Nov. 20, 2017.

The revolver has a one-year extension option.

The revolving loan commitment and the total term loan amount under the credit agreement may be increased to $600 million and $400 million, respectively.

RLJ may use up to $30 million of available revolving commitments for the issuance of letters of credit and up to $40 million for swingline loans.

At closing, the entire $300 million of the revolver was available for borrowings, less any amounts already drawn. The company had $16 million of borrowings outstanding under the revolver and drew the entire $275 million under the five-year term loan.

The interest rate for the revolver is Libor plus 175 basis points to 250 bps, depending on the total leverage ratio of the company and its subsidiaries. Interest for the five-year term loan is Libor plus 170 bps to 245 bps, also based on the total leverage ratio.

There is an unused commitment fee of 25 bps or 35 bps, depending on the amount of borrowings under the revolver.

The restated credit agreement requires that RLJ and its subsidiary guarantors own at least 90% of the total asset value of the company and its subsidiaries.

In addition, the amended credit agreement requires the company to satisfy some financial covenants, including:

• Ratio of total debt to EBITDA of not more than 6.0 to 1.0;

• Ratio of adjusted EBITDA to fixed charges of not less than 1.5 to 1.0;

• Ratio of secured indebtedness to total asset value of no more than 50% for the period from Nov. 20 through and including Sept. 30, 2013 and 45% for all periods after that;

• Ratio of secured recourse debt to total asset value of not more than 10%;

• Ratio of unsecured indebtedness to unencumbered asset value of not more than 60%;

• Ratio of adjusted net operating income of the unencumbered pool to unsecured interest expense of not less than 2.0 to 1.0; and

• Tangible net worth of not less than $1.78 billion (plus 75% of the proceeds of any equity issuances after Sept. 30).

According to the filing, RLJ also borrowed on Nov. 20 $125 million under an unsecured term loan due Nov. 20, 2019.

Interest for the seven-year term loan is Libor plus 205 bps to 300 bps, depending on the total leverage ratio.

The seven-year loan may not be prepaid during the first year but may be repaid before the end of the fifth year with a prepayment premium.

As previously reported, the $400 million borrowed at closing were used to repay about $70 million of revolver debt and retire about $330 million of secured mortgage loans.

Wells Fargo Securities LLC and Bank of America Merrill Lynch were the lead arrangers on the revolver and five-year term loan, and Wells Fargo and PNC Capital Markets LLC were the lead arrangers on the seven-year term loan.

RLJ Lodging Trust is a Bethesda, Md.-based self-advised real estate investment trust focused on acquiring premium-branded, focused service and compact full-service hotels.

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