RLJ Lodging adds $225 million term loan, extends revolver to 2027

By Mary-Katherine Stinson

Lexington, Ky., May 16 – RLJ Lodging Trust as parent guarantor and its operating partnership RLJ Lodging Trust, LP as borrower amended an amended and restated credit agreement with Wells Fargo Bank, NA as administrative agent on May 10, according to an 8-K filing with the Securities and Exchange Commission.

The fourth amendment extends the maturity of the operating partnership’s $600 revolving credit facility to May 10, 2027 with either a one-year or two six-month extension options.

It also adds a new $225 million tranche A-1 term loan with a May 10, 2026 maturity. The includes up to two one-year extension options.

The amended agreement also documents the partnership’s existing $400 million term loan originally incurred under the prior agreement scheduled to mature May 18, 2025. Except for transitioning the interest rate to SOFR from Libor, the economic terms of the tranche A-2 term loan were not changed.

The partnership may request increases in the revolving loan commitment up to $750 million, the total tranche A-1 loan amount up to $325 million, the total tranche A-2 loan amount up to $600 million and incur one or more additional tranches of term loans totaling up to $475 million, all subject to gaining additional commitments from the lenders.

Up to $30 million of the revolver is available for letters of credit.

Borrowings under the amended agreement will accrue interest at SOFR plus a credit spread adjustment of 10 basis points plus a margin ranging from 140 to 195 bps for the revolver, adjusted SOFR plus a margin ranging from 145 to 220 bps for the A-1 term loan tranche or adjusted SOFR plus a margin ranging from 135 to 190 bps for the A-2 term loan tranche. In all cases, the actual margin is determined based on the total leverage ratio of the company and its subsidiaries.

The initial margin for the revolver is 155 bps. For the tranche A-1 term loan, the initial margin is 160 bps. For the tranche A-2 term loan, it is 150 bps.

There is an unused commitment fee of 20 or 25 bps, depending on the amount of borrowings under the revolver, which accrues on unused portions.

If the company or the operating partnership’s long-term senior non-credit enhanced debt receives an investment-grade credit rating, interest rates would change to SOFR plus 72.5 bps to 140 bps for the revolver, SOFR plus a margin ranging from 80 bps to 160 bps for the A-1 term loan tranche or 85 bps to 175 bps for the A-2 term loan tranche.

In lieu of the unused revolver fee a facility fee ranging from 10 bps to 30 bps, depending on the applicable credit rating in effect, would accrue on the total commitment under the revolver regardless of usage.

The amended agreement requires the satisfaction of certain financial covenants including maintaining a leverage ratio of not more than 7.25x, a ratio of adjusted EBITDA to fixed charges not less than 1.5x, a ratio of secured debt to total asset value no more than 45%, ratio of unsecured debt (net of the amount of unrestricted cash and cash equivalents in excess of $25 million) to unencumbered asset value of not more than 60% or 65% following an acquisition and a ratio of adjusted net operating income of the unencumbered pool to unsecured interest expense of not less than 2x.

If the leverage ratio exceeds 6.5x at the end of any applicable four-quarter fiscal period, the applicable interest rate on all borrowings will increase by 35 bps for six months.

Proceeds of the amended facility may be used by the company or the partnership for the redevelopment or development costs of its hotel properties, to finance hotel acquisitions and capital expenditures, for dividends and debt repayment, to provide for general working capital needs and for other general corporate purposes.

Wells Fargo Bank, NA is the administrative agent.

For the revolver, Wells Fargo Securities, LLC, BofA Securities, Inc., Capital One, NA, PNC Bank, NA, Truist Securities, Inc., Regions Capital Markets and TD Bank, NA were the joint lead arrangers.

Wells Fargo Securities, LLC, BofA Securities, Inc., Capital One, NA and PNC Capital Markets LLC were the joint bookrunners.

Bank of America, NA, Capital One, NA and PNC Bank, NA were the syndication agents.

Truist Bank, Regions Bank and TD Bank, NA were the documentation agents.

For the tranche A-1 term loan facility, Wells Fargo Securities, LLC, BofA Securities, Inc., Capital One, NA, PNC Capital Markets LLC, NA, Truist Securities, Inc., Regions Capital Markets, TD Bank, NA and SMBC were the joint lead arrangers.

Wells Fargo Securities, LLC, BofA Securities, Inc. and PNC Capital Markets, LLC were the joint bookrunners.

Bank of America, NA and PNC Bank, NA were the syndication agents.

Capital One, NA, Truist Bank, Regions Bank, SMBC and TD Bank, NA were the documentation agents.

For the tranche A-2 term loan facility, Wells Fargo Securities, LLC, PNC Capital Markets LLC, NA, Regions Capital Markets and U.S. Bank NA were the joint lead arrangers and joint bookrunners.

PNC Bank, NA, Regions Bank and U.S. Bank NA were the syndication agents.

Bank of America, NA and TD Bank, NA were the documentation agents.

For all three facilities, Wells Fargo Securities, LLC is listed as sustainability structuring agent.

In connection with the new facility, the partnership repaid all amounts outstanding under its existing $400 million term loan and its existing $225 million term loan, both with a maturity date of Jan. 25, 2024.

As of closing, the revolver was undrawn. There is $225 million outstanding under the tranche A-1 term loan and $400 million outstanding under the tranche A-2 term loan.

Also on May 10, the company and the operating partnership entered into the first amendment to its amended and restated term loan agreement with Capital One, NA as administrative agent dated Nov. 2, 2022 to make the terms and provisions consistent with those of the amended agreement.

RLJ Lodging is a Bethesda, Md.-based real estate investment trust that owns primarily premium-branded, high-margin, focused-service and compact full-service hotels.

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