Park Hotels gets $1.1 billion delayed-draw term loans commitment

By Sara Rosenberg

New York, May 6 – Park Hotels & Resorts Inc. has received a commitment for $1.1 billion of unsecured delayed-draw term loans to help fund its acquisition of Chesapeake Lodging Trust, and repay Chesapeake’s unsecured term loan and two mortgages, according to an 8-K filed with the Securities and Exchange Commission on Monday.

Bank of America Merrill Lynch is the lead arranger and bookrunner on the deal.

The debt consists of a $250 million two-year delayed-draw term loan A-1 and an $850 million five-year delayed-draw term loan A-2.

Delayed-draw availability is until 90 days from the closing date.

Pricing on the debt can range from Libor plus 135 basis points to 265 bps based on debt to EBITDA.

The commitment for the term loan A-1 will be reduced by the net cash proceeds from customary mandatory commitment reduction and prepayment events from issuances of equity, the incurrence of certain other debt or the sale of available assets, in each case subject to limited exceptions.

Covenants include a maximum leverage ratio, a minimum fixed charge coverage ratio, maximum secured indebtedness and a maximum unencumbered leverage ratio.

Under the agreement, Chesapeake is being bought for $11.00 in cash and 0.628 of a share of Park common stock for each Chesapeake share. The transaction is valued at about $2.7 billion, inclusive of transaction costs. Park stockholders and Chesapeake shareholders will own around 84% and 16% of the combined company, respectively.

The combined company will have an estimated enterprise value of $12 billion.

Closing is expected late in the third quarter or early in the fourth quarter, subject to customary conditions, including receipt of the approval of Chesapeake shareholders.

Net debt to adjusted EBITDA pro-forma for the transaction is 4.6 times; however, when accounting for the five hotels that are anticipated to be sold prior to closing, pro-forma net debt to adjusted EBITDA falls to 4.4 times.

Park Hotels is a Tysons, Va.-based lodging real estate investment trust with a diverse portfolio of hotels and resorts. Chesapeake is an Arlington, Va.-based self-advised lodging real estate investment trust focused on investments primarily in upper-upscale hotels in major business and convention markets and, on a selective basis, premium select-service hotels.

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