Service Properties Trust Prices an Aggregate of $1.2 Billion of Senior Unsecured Notes

Rhea-AI Summary

Service Properties Trust (SVC) has priced underwritten public offerings of $700 million of 8.375% Senior Guaranteed Unsecured Notes due 2029 and $500 million of 8.875% Senior Guaranteed Unsecured Notes due 2032. These notes will be guaranteed by certain subsidiaries and are expected to settle on June 3, 2024, subject to customary closing conditions.

SVC plans to use the proceeds to redeem $800 million of its 7.50% senior unsecured notes due 2025, and to fund the purchase of $350 million of its 4.50% senior unsecured notes due 2025, including any premiums and accrued interest. Any remaining proceeds will be used for general business purposes.

Citigroup, BofA Securities, J.P. Morgan, BMO Capital Markets, Goldman Sachs, Morgan Stanley, PNC Capital Markets, UBS Securities, and Wells Fargo Securities are the joint book-running managers for the offerings.

Positive

• SVC is raising $1.2 billion through senior guaranteed unsecured notes.
• The new notes carry higher interest rates (8.375% and 8.875%) compared to the notes being redeemed (7.50% and 4.50%).
• The offerings are expected to settle by June 3, 2024, providing a clear timeline for investors.
• The proceeds will help manage existing debt, aiming to redeem $800 million of 7.50% notes and $350 million of 4.50% notes.
• Remaining proceeds will be used for general business purposes, potentially providing operational flexibility.

Negative

• The new notes carry higher interest rates (8.375% and 8.875%) which could increase interest expenses.
• The company is undertaking significant debt redemption, indicating a substantial financial obligation.
• The issuance of new debt can dilute the company's financial position and may affect its credit rating.
• There could be risks associated with the closing conditions for the settlement of the offerings.

Insights

Financial Analyst

The issuance of $1.2 billion in senior unsecured notes by Service Properties Trust (SVC) is a significant financial maneuver aimed at refinancing existing debt. Specifically, SVC intends to use the proceeds to redeem $800 million of its 7.50% senior unsecured notes due in 2025 and repurchase up to $350 million of its 4.50% senior unsecured notes, also due in 2025. By doing this, SVC is extending its debt maturity profile and taking advantage of current market conditions to lock in new interest rates, albeit higher than the ones being replaced.

An 8.375% and 8.875% interest rate for the new notes represents a higher cost of borrowing compared to the previous rates of 7.50% and 4.50%. While this will increase SVC's interest expense in the short term, it provides more time to generate cash flow for future debt payments. Investors should monitor how well SVC manages its cash flows and evaluates the company's ability to handle higher borrowing costs. This move indicates confidence from the management in stabilizing the company's financial health and leveraging improved market conditions.

Market Research Analyst

For retail investors, the issuance of new senior unsecured notes secured by Service Properties Trust (SVC) signals an effort to optimize their balance sheet and manage liquidity. The refinancing plan might temporarily strain the company's finances due to the higher interest rates of 8.375% and 8.875% compared to their current obligations. However, the inclusion of top-tier financial institutions like Citigroup, BofA Securities and J.P. Morgan as joint book-running managers, lends credibility and indicates strong institutional support.

Furthermore, the interest rates set for the new notes reflect current market conditions and investor sentiment towards SVC's creditworthiness. This suggests that while there is confidence in the company's ability to service its debt, the market perceives a certain level of risk associated with SVC's financial health. Retail investors should weigh these factors and consider the long-term impact of this refinancing strategy on SVC's overall financial performance and stock price movement.

NEWTON, Mass.--(BUSINESS WIRE)-- Service Properties Trust (Nasdaq: SVC), or SVC, today announced that it has priced underwritten public offerings of $700.0 million of 8.375% Senior Guaranteed Unsecured Notes due 2029 and $500.0 million of 8.875% Senior Guaranteed Unsecured Notes due 2032. Both series of notes will be guaranteed by certain of SVC’s subsidiaries. The settlement of the offerings is expected to occur on June 3, 2024, subject to the satisfaction of customary closing conditions. SVC expects to use the net proceeds from the offerings to redeem $800.0 million principal amount outstanding of its 7.50% senior unsecured notes due 2025, or the 7.50% Notes, and, together with cash on hand to the extent necessary, (1) to fund the purchase of any and all of the $350.0 million principal amount outstanding of its 4.50% senior unsecured notes due 2025, or the 4.50% Notes, including any premium and accrued and unpaid interest on the tendered notes, pursuant to its previously announced tender offer, or the Tender Offer, and (2) to the extent any of the 4.50% Notes have not been tendered pursuant to the Tender Offer, effect the satisfaction and discharge of such notes, or the Satisfaction and Discharge. SVC expects to use any remaining proceeds for general business purposes.

The joint book-running managers for the offerings were Citigroup Global Markets Inc., BofA Securities, Inc., J.P. Morgan Securities LLC., BMO Capital Markets Corp., Goldman Sachs & Co. LLC, Morgan Stanley & Co. LLC, PNC Capital Markets LLC, UBS Securities LLC and Wells Fargo Securities LLC.

This press release shall not constitute an offer to sell or a solicitation of an offer to buy, nor shall there be any sale of these securities in any state or jurisdiction in which the offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of that state or jurisdiction. SVC and the guarantors have filed a registration statement including a prospectus and will file a prospectus supplement with the Securities and Exchange Commission, or SEC, for the offerings to which this communication relates. Before you invest, you should read the prospectus and prospectus supplement, when available, in that registration statement and other documents SVC has filed with the SEC for more complete information about SVC and the guarantors and the offerings. You may obtain these documents for free by visiting EDGAR on the SEC’s website at www.sec.gov. Copies of the prospectus supplement relating to the offerings and the related prospectus may be obtained by calling Citigroup toll-free, at (800) 831-9146, BofA Securities, toll-free at (800) 294-1322 or J.P. Morgan, toll free at 1-(212)-834-4533.

About Service Properties Trust

Service Properties Trust (Nasdaq: SVC) is a real estate investment trust which owns a diverse portfolio of hotels and service focused retail net lease properties across the United States and in Puerto Rico and Canada, the majority of which are extended stay and select service. SVC is managed by The RMR Group (Nasdaq: RMR), a leading U.S. alternative asset management company. SVC is headquartered in Newton, MA.

WARNING CONCERNING FORWARD-LOOKING STATEMENTS

This press release contains statements, including statements about the offerings, the tender offer and the satisfaction and discharge, 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. SVC currently intends to use the net proceeds from these offerings to redeem the 7.50% Notes; however, the receipt and use of the proceeds is dependent on the closing of these offerings which may not occur. SVC may not purchase $350.0 million of the 4.50% Notes in the Tender Offer and the Tender Offer may not be completed. SVC also currently intends to effect the Satisfaction and Discharge of any notes not purchased by it in the Tender Offer; however, SVC may determine not to effect the Satisfaction and Discharge or it may be delayed. 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.

The information contained in SVC’s filings with the 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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240517376527/en/

Stephen Colbert, Director, Investor Relations

(617) 796-8232

Source: Service Properties Trust

FAQ

What is the value of the senior unsecured notes issued by SVC?

Service Properties Trust has issued an aggregate of $1.2 billion in senior unsecured notes.

What are the interest rates for SVC's newly issued notes?

The newly issued notes have interest rates of 8.375% for the 2029 notes and 8.875% for the 2032 notes.

When is the expected settlement date for SVC's new notes?

The expected settlement date is June 3, 2024.

What will SVC use the proceeds from the notes offering for?

SVC will use the proceeds to redeem $800 million of 7.50% notes due 2025 and to purchase $350 million of 4.50% notes due 2025, with remaining proceeds for general business purposes.

Who are the joint book-running managers for SVC's notes offering?

The joint book-running managers are Citigroup, BofA Securities, J.P. Morgan, BMO Capital Markets, Goldman Sachs, Morgan Stanley, PNC Capital Markets, UBS Securities, and Wells Fargo Securities.

What is the stock symbol for Service Properties Trust?

The stock symbol for Service Properties Trust is SVC.