Service Properties Trust Amends $1.4 Billion Credit Agreement
Service Properties Trust (SVC) has amended its credit agreement governing a $1 billion revolving credit facility and a $400 million term loan. The amendment waives all existing financial covenants until July 15, 2022, allowing continued access to undrawn amounts. SVC repaid the $400 million term loan on November 5, 2020. Key terms include the pledge of additional equity interests worth $1.8 billion, an increased interest rate premium by 30 basis points, and restrictions on distributions and share repurchases. The amendment aims to enhance financial flexibility amid challenging economic conditions.
- Waiver of all existing financial covenants through July 15, 2022.
- Access to undrawn amounts under the revolving credit facility remains available.
- Repayment of $400 million term loan enhances liquidity.
- Increased interest rate premium over LIBOR by 30 basis points.
- Potential risks of failing to comply with credit agreement terms.
- Uncertainty surrounding SVC's liquidity to meet capital requirements.
NEWTON, Mass.--(BUSINESS WIRE)--Service Properties Trust (Nasdaq: SVC), or SVC, today announced that it has amended the credit agreement governing its
- All existing financial covenants have been waived through the end of the agreement term, or July 15, 2022, or the New Waiver Period;
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SVC has pledged certain additional equity interests of subsidiaries owning properties with an undepreciated book value of, together with the existing pledged equity interests,
$1.8 billion as of September 30, 2020. Following the closing of the amendment, SVC will provide first mortgage liens on 74 properties owned by the pledging subsidiaries to secure its obligations under the credit agreement. These properties include 62 travel centers in 26 states and 12 hotels in nine states with aggregate gross book values of$1.2 billion and$641 million , respectively, as of September 30, 2020; -
SVC has the ability to fund up to
$250.0 million of capital expenditures per year and up to$50.0 million of certain other investments per year as defined in the credit agreement; - The interest rate premium over LIBOR under SVC’s revolving credit facility increased by 30 basis points;
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Certain covenants and restrictions on distributions to common shareholders, share repurchases, incurring indebtedness and acquiring real property (in each case subject to various exceptions), and the minimum liquidity requirement of
$125.0 million , will remain in place during the New Waiver Period; and - SVC is generally required to apply the net cash proceeds from the disposition of assets, capital markets transactions and debt refinancings to the repayment of outstanding loans under the credit agreement, and then to other debt maturities.
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 to SVC’s credit agreement. Wells Fargo Bank, National Association is the Administrative Agent. Bank of America, N.A., PNC Bank, National Association and Royal Bank of Canada are the Syndication Agents.
Brian Donley, Treasurer and Chief Financial Officer of SVC, made the following statement:
“We very much appreciate the efforts of our participating lenders who worked with us to execute this amendment, which enhances our financial flexibility. This amendment assures our continued access to undrawn amounts under our revolving credit facility and we believe provides us sufficient liquidity to fund our ongoing capital requirements at least through 2022. We believe the increased costs and restrictions agreed to as part of this amendment, including providing collateral, were necessary in the current environment.”
About Service Properties Trust
Service Properties Trust is a real estate investment trust which owns a diverse portfolio of hotels and net lease service and necessity-based retail properties across the United States and in Puerto Rico and Canada with 149 distinct brands across 23 industries. SVC’s properties are primarily operated under long-term management or lease agreements. SVC is managed by the operating subsidiary of The RMR Group Inc. (Nasdaq: RMR), an alternative asset management company that is headquartered in Newton, Massachusetts.
Warning Concerning Forward-Looking Statements
This press release contains statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Also, whenever SVC uses words such as “believe”, “expect”, “anticipate”, “intend”, “plan”, “estimate”, “will”, “may” and negatives or derivatives of these or similar expressions, SVC is making forward-looking statements. These forward-looking statements are based upon SVC’s present intent, beliefs or expectations, but forward-looking statements are not guaranteed to occur and may not occur. Actual results may differ materially from those contained in or implied by SVC’s forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other factors, some of which are beyond SVC’s control. For example:
- Although SVC obtained a waiver of existing financial covenants through July 15, 2022, it may fail to comply with the terms of the waiver and other requirements under its credit agreement. In addition, SVC may fail to satisfy its public debt covenants. SVC’s ability to borrow under its revolving credit facility is subject to SVC satisfying those covenants and other conditions. If SVC’s operating results and financial condition are significantly and adversely impacted by current economic conditions or otherwise, SVC may fail to satisfy those covenants and conditions. Further, if SVC fails to satisfy its debt covenants, it may be prohibited from incurring additional indebtedness and may need to repay outstanding debts.
- Mr. Donley states the amendment provides SVC sufficient liquidity to fund its ongoing capital requirements at least through 2022. However, SVC’s capital requirements may exceed its current expectations. As a result, SVC may not have sufficient liquidity to fund its ongoing capital requirements.
The information contained in SVC’s filings with the Securities and Exchange Commission, or SEC, including under the caption “Risk Factors” in SVC’s periodic reports, or incorporated therein, identifies other important factors that could cause differences from SVC’s forward-looking statements. SVC’s filings with the SEC are available on the SEC's website at www.sec.gov.
You should not place undue reliance upon forward-looking statements.
Except as required by law, SVC does not intend to update or change any forward-looking statements as a result of new information, future events or otherwise.
A Maryland Real Estate Investment Trust with transferable shares of beneficial interest listed on the Nasdaq.
No shareholder, Trustee or officer is personally liable for any act or obligation of the Trust.
