Sunstone Hotel amends loans to extend covenant relief periods

Chicago, Nov. 29 – Sunstone Hotel Investors Inc. entered into a fourth amendment to its amended and restated credit facility on Nov. 22, primarily to extend the covenant relief period through Sept. 30, 2022, according to an 8-K filed with the Securities and Exchange Commission.

One of the conditions of the extension is that the company achieve a minimum fixed charge coverage ratio of 1x as of June 30, 2022.

Additionally, the amendment extends the ratio adjustment period by one additional quarter so that the original financial covenants will now be phased in over the following five quarters after the covenant relief period.

The company may ask for one-time extensions to its term 1 loans and term 2 loans for an additional 12 months with the payment of a 15 basis points extension fee of the principal amount being extended.

The fourth credit agreement, which modifies certain financial covenants until Jan. 1, 2024 unless terminated by the company on an earlier date, becomes effective upon the issuance of at least $300 million of high-yield bonds or the repayment of the company’s outstanding notes. Alternatively, the company can complete an asset sale that will result in net proceeds of at least $130 million.

The company needs to issue bonds, repay existing notes or sell assets by Dec. 31.

As of Nov. 23, there were no draws on the revolver and $185 million of term loans were outstanding.

Wells Fargo Bank, NA is the administrative agent on the credit facility, which dates from Oct. 17, 2018.

Sunstone is an Irvine, Calif.-based real estate investment trust.

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