Service Properties Trust cuts revolver to $800 million, ups rate 15 bps

By Rebecca Melvin

Concord, N.H., April 20 – Service Properties Trust amended its revolving credit facility and extended the maturity date by six months to Jan. 15, 2023, according to an 8-K filing with the Securities and Exchange Commission.

The commitments have been reduced to $800 million from $1 billion, and the interest rate payable on borrowings was increased to 250 basis points per annum from 235 bps per annum.

The facility fee on the total amount of lending commitments under the facility remains unchanged at 30 bps.

The interest rate premiums and the facility fee continue to be subject to adjustment based on changes to credit ratings, and the interest rate premium will increase by an additional 25 bps if certain financial covenants are not met.

Under the April 14 amendment, some financial covenants will be tested and in full force and effect beginning July 1. The covenants were modified to lower the required fixed-charge coverage ratio to 1.0x from 1.5x through Dec. 31, 2022, to increase the minimum liquidity requirement to $150 million from $125 million and to increase the required leverage ratio limit to 70% from 60%.

Also, the company is permitted under the agreement to acquire up to $300 million of real property through the temporary waiver period, which was extended to Dec. 31, 2022.

In addition, the company can fund through the waiver period an aggregate of $100 million of capital contributions requested by Sonesta Holdco Corp., or Sonesta, for business activities and to acquire additional shares of common stock of TravelCenters of America Inc., or TA, to retain its pro rata ownership of 8.2% of TA, an increase from the previous aggregate limit of $50 million.

The amendment requires the company to maintain minimum liquidity of $650 million until repayment of its $500 million of 5% senior notes due August 2022, with at least $150 million of liquidity to be maintained thereafter.

As before, the company has the option to further extend the maturity date of the revolver by an additional six months, subject to payment of an extension fee and meeting specified conditions, including – pursuant to the amendment – maintaining a $650 million minimum liquidity requirement until the $500 million of 4.5% senior notes due June 2023 are repaid.

The requirement is reduced to $150 million if the company is in compliance with some financial covenants, including the 1.5x ratio of consolidated income available for debt service to debt service required to incur additional debt under the agreements governing the company’s public debt.

The revolving credit facility continues to be secured by 73 properties.

Wells Fargo Securities, LLC, BofA Securities, Inc., PNC Capital Markets, LLC and RBC Capital Markets acted as joint lead arrangers and joint lead bookrunners on the amendment. Wells Fargo Bank, NA is the administrative agent. Bank of America, NA, PNC Bank, NA and Royal Bank of Canada are the syndication agents.

Service Properties Trust is a Newton, Mass.-based real estate investment trust that owns a portfolio of hotels and net lease service and necessity-based retail properties.

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