Pebblebrook Hotel Trust Announces Pricing of $400 Million of 6.375% Senior Notes Due 2029

Rhea-AI Summary

Pebblebrook Hotel Trust (NYSE: PEB) announced the pricing of $400 million aggregate principal amount of 6.375% senior notes due 2029 through its operating partnership, Pebblebrook Hotel, L.P., and PEB Finance Corp. The notes, priced on September 23, 2024, will be senior unsecured obligations and initially guaranteed by the Company and its subsidiaries that guarantee existing credit facilities. The private placement is expected to close on October 3, 2024.

The net proceeds will be used to:

• Pay down at least $253.0 million of unsecured term loans
• Use the balance (up to $137.4 million) to pay down other unsecured term loans and/or repurchase convertible senior notes

The notes are being offered only to qualified institutional buyers and certain non-U.S. persons in offshore transactions, in compliance with Securities Act regulations.

Positive

• Raising $400 million through senior notes offering
• Using proceeds to pay down unsecured term loans and potentially repurchase convertible senior notes
• Successful pricing of notes at 6.375% interest rate

Negative

• Increasing debt load with $400 million in new senior notes
• Higher interest expense due to 6.375% interest rate on new notes

Insights

Financial Analyst

Pebblebrook Hotel Trust's pricing of $400 million in senior notes is a significant financial move with several implications:

• The 6.375% interest rate reflects current market conditions and the company's credit profile.
• Using proceeds to pay down existing term loans could improve the company's debt structure and potentially reduce interest expenses.
• The option to repurchase convertible notes may help manage dilution risk.
• This private placement demonstrates Pebblebrook's ability to access capital markets, which is important for REITs.
• The unsecured nature of the notes provides financial flexibility but may come at a higher interest cost compared to secured debt.

While this refinancing could strengthen Pebblebrook's balance sheet, investors should monitor how effectively the company deploys capital and manages its overall debt load in the challenging hospitality sector.

Real Estate Investment Trust (REIT) Specialist

This debt issuance by Pebblebrook Hotel Trust is a strategic move in the REIT space:

• The $400 million raise aligns with typical REIT capital management strategies, focusing on maintaining liquidity and optimizing the debt structure.
• By targeting "qualified institutional buyers," Pebblebrook is tapping into a sophisticated investor base, potentially securing better terms.
• The 2029 maturity provides a medium-term financing horizon, balancing near-term flexibility with longer-term stability.
• Using proceeds to refinance existing debt suggests a proactive approach to managing the company's capital stack.
• For hotel REITs, maintaining a strong balance sheet is important given the sector's sensitivity to economic cycles and recent pandemic-related challenges.

Investors should consider how this debt issuance positions Pebblebrook relative to its peers and its potential impact on the company's ability to navigate the evolving hospitality landscape.

BETHESDA, Md.--(BUSINESS WIRE)-- Pebblebrook Hotel Trust (NYSE: PEB) (the “Company”) today announced that on September 23, 2024, its operating partnership, Pebblebrook Hotel, L.P. (the “Operating Partnership”) and a wholly owned subsidiary of the Operating Partnership, PEB Finance Corp. (together with the Operating Partnership, the “Issuers”), priced the private placement of $400 million aggregate principal amount of 6.375% senior notes due 2029 (the “Notes”). The Notes will be senior unsecured obligations of the Issuers and will initially be fully and unconditionally guaranteed by the Company and the Operating Partnership’s subsidiaries that guarantee the existing credit facilities of the Operating Partnership. Subject to customary closing conditions, the Issuers expect the private placement of the Notes to close on October 3, 2024. The Operating Partnership intends to use the net proceeds from the offering as follows: (i) with at least $253.0 million, to pay down in whole or in part one or more of the Operating Partnership’s unsecured term loans and (ii) with the balance, which may be up to $137.4 million, to pay down part of one or more of the Operating Partnership’s other unsecured term loans and/or repurchase a portion of the convertible senior notes of the Company.

The Notes and the related guarantees have not been and will not be registered under the Securities Act of 1933, as amended (the “Securities Act”), any state securities laws or the securities laws of any other jurisdiction. The Notes may not be offered or sold in the United States or to U.S. persons absent registration or pursuant to an exemption from, or in a transaction not subject to, registration. The Notes will be offered and sold only to persons reasonably believed to be “qualified institutional buyers” pursuant to Rule 144A under the Securities Act and to certain non-U.S. persons in offshore transactions outside the United States pursuant to Regulation S under the Securities Act. This press release is neither an offer to sell nor a solicitation of an offer to buy the Notes or any other securities and shall not constitute an offer to sell or a solicitation of an offer to buy, or a sale of, the Notes or any other securities in any jurisdiction in which such offer, solicitation or sale would be unlawful.

This press release contains certain “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other federal securities laws, including those related to the offering of Notes, the use of proceeds therefrom and whether or not the Issuers will consummate the offering. Forward-looking statements are generally identifiable by use of forward-looking terminology such as “may,” “will,” “should,” “potential,” “intend,” “expect,” “seek,” “anticipate,” “estimate,” “approximately,” “believe,” “could,” “project,” “predict,” “forecast,” “continue,” “assume,” “plan,” references to “outlook” or other similar words or expressions. These forward-looking statements are subject to various risks and uncertainties, many of which are beyond the Company’s control, which could cause actual results to differ materially from such statements.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240924031046/en/

Raymond D. Martz, Co-President and Chief Financial Officer, Pebblebrook Hotel Trust - (240) 507-1330

Source: Pebblebrook Hotel Trust

FAQ

What is the interest rate and maturity of Pebblebrook Hotel Trust's new senior notes (PEB)?

Pebblebrook Hotel Trust (PEB) priced $400 million of senior notes with a 6.375% interest rate, due in 2029.

When is the expected closing date for Pebblebrook Hotel Trust's (PEB) $400 million senior notes offering?

The private placement of Pebblebrook Hotel Trust's (PEB) $400 million senior notes is expected to close on October 3, 2024.

How does Pebblebrook Hotel Trust (PEB) plan to use the proceeds from its $400 million senior notes offering?

Pebblebrook Hotel Trust (PEB) plans to use at least $253.0 million to pay down unsecured term loans, and the balance (up to $137.4 million) to pay down other unsecured term loans and/or repurchase convertible senior notes.

Are Pebblebrook Hotel Trust's (PEB) new senior notes registered under the Securities Act?

No, Pebblebrook Hotel Trust's (PEB) new senior notes and related guarantees are not registered under the Securities Act and may only be offered to qualified institutional buyers and certain non-U.S. persons in offshore transactions.