Extends relief on key covenant requirements; Balance sheet and liquidity remain strong.
WEST PALM BEACH, FLA. – Chatham Lodging Trust a hotel real estate investment trust (REIT) focused on investing in upscale, extended-stay hotels and premium branded, select-service, announced that it amended its $250 million revolving credit facility. This amendment follows the previous amendment completed in May 2020.
Key terms of this amendment, which are applicable during the waiver period, are as follows:
- Waiver of key financial covenants through December 31, 2021.
- Testing of covenants as of March 31, 2022.
- Continues to allow for full utilization of entire $250 million credit facility.
- Uphold applicable margin on borrowings at LIBOR plus 250 basis points if borrowings on the credit facility are under $200 million and LIBOR plus 300 basis points if borrowings are over $200 million.
- Maintain minimum liquidity of $25 million whether in cash or available capacity under the credit facility.
- Allow common share dividends limited to 100 percent of REIT taxable income, and any dividends paid would include a cash component no greater than the minimum percentage allowed under the Internal Revenue Code.
Chatham has estimated liquidity of $146 million, including cash of approximately $32 million as of September 30, 2020 and remaining borrowing capacity on the credit facility of $114 million. Pro forma for the sale of the Residence Inn San Diego Mission Valley and the pending sale of the joint venture with Colony Capital, Chatham’s key credit ratios are significantly enhanced. Pro forma leverage goes to 35 percent from 38 percent based on the ratio of the company’s pro forma net debt to hotel investments at cost as of September 30, 2020, and Chatham’s pro forma 2019 net debt to EBITDA ratio decreases an entire point to 4.7x compared to 5.7x.
Participating lenders in the credit facility include Barclays Bank PLC, Regions Capital Markets, Citibank N.A., US Bank National Association, Wells Fargo Bank National Association, Bank of America N.A., Citizens Bank N.A. and BMO Harris Bank N.A.
“We very much appreciate the collaborative efforts of our participating lending partners to execute this amendment to our credit facility with no significant changes compared to the first amendment earlier this year. This is a testament to our high quality hotels, our performance and the corporate actions we have taken throughout the pandemic to solidify our financial position,” highlighted Jeffrey H. Fisher, Chatham’s president and chief executive officer. “We made significant cost reductions at the outset of the pandemic, including meaningful corporate layoffs and salary reductions, we have delivered the highest absolute RevPAR of any lodging REIT throughout the pandemic, and with the opportunistic sale of the Residence Inn San Diego Mission Valley, we have been able to pay down approximately $65 million or 10 percent of all debt outstanding, including $38 million on our credit facility. We understand our responsibility to protect long-term value for our equity holders, and through our actions and with this amendment, we have further improved our financial position which should propel Chatham to come out of the pandemic healthier than many of our lodging REIT peers.”
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