Pebblebrook enters into $1.75 billion unsecured term loan facility

By Sarah Lizee

Olympia, Wash., Nov. 1 – Pebblebrook Hotel Trust secured a new $1.75 billion unsecured term loan facility on Wednesday with Pebblebrook Hotel, LP as borrower and Bank of America, NA as administrative agent, according to an 8-K filing with the Securities and Exchange Commission.

The facility will be comprised of five term loan facilities, including a $250 million unsecured term loan due Dec. 31, 2020, a $300 million unsecured term loan due Nov. 1, 2021, a $400 million unsecured term loan due Nov. 1, 2022, a $400 million unsecured term loan due Nov. 1, 2023 and a $400 million unsecured term loan due Jan. 31, 2024.

Under some conditions the operating partnership may request additional lender commitments of up to a total of $250 million for a total borrowing capacity of $2 billion.

Borrowings bear interest at Libor plus a margin based on the leverage ratio. The margin ranges from 140 basis points to 220 bps.

If the company or the operating partnership gets an investment-grade rating from Moody’s Investors Service or S&P, the company may elect to convert the pricing structure to a ratings-based grid, in which case the margin over Libor would range from 90 bps to 175 bps.

There is a 25 bps fee on the unused portion of the term loans.

There are no prepayment penalties.

The five term loans will only be funded in connection with completion of the company’s pending merger with LaSalle Hotel Properties, which, subject to approvals from LaSalle’s shareholders and the company’s shareholders, is expected to close on Nov. 30.

The company is required to maintain a maximum leverage ratio of 6.75 to 1, or up to 7 to 1 for up to four consecutive quarters one time during the term of the agreement, and a maximum secured recourse debt ratio of 5%, or up to 10% for up to four consecutive quarters one time during the term of the agreement.

The agreement also requires a maximum percentage of secured debt to total asset value of 45%, a minimum fixed-charge coverage ratio of 1.5 to 1, a maximum unsecured interest coverage ratio of 2 to 1, a minimum tangible net worth and a maximum ratio of unsecured debt to total unencumbered asset value of 60%, or 65% for up to three consecutive quarters up to three non-consecutive times during the term of the agreement.

Bank of America Merrill Lynch, U.S. Bank, NA, Wells Fargo Securities, PNC Capital Markets, BMO Capital Markets, SunTrust Robinson Humphrey, Bank of Nova Scotia and Compass Bank are acting as joint lead arrangers and Merrill Lynch, U.S. Bank and Wells Fargo Securities are acting as joint bookrunners.

U.S. Bank and Wells Fargo are acting as co-syndication agents, PNC Bank, Bank of Montreal, SunTrust Bank, Scotiabank and Compass Bank are acting as co-documentation agents, and Capital One, Regions Bank, Sumitomo Mitsui Banking Corp. and TD Bank are acting as senior managing agents.

In connection with the pending merger, the company entered into a bridge loan commitment letter with Bank of America and Merrill Lynch, under which Bank of America agreed to be the administrative agent for a $2.4 billion senior unsecured bridge loan facility. The commitment letter remains in effect and is not affected by the term loan credit agreement, the company said.

Pebblebrook Hotel Trust is a Bethesda, Md.-based real estate investment trust that acquires and invests primarily in upper upscale, full-service hotels located in urban markets in major gateway cities.

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