Service Properties Trust amends credit agreement for covenant relief

By Sarah Lizee

Olympia, Wash., May 11 – Service Properties Trust amended the credit agreement governing its $1 billion unsecured revolver and $400 million unsecured term loan for a waiver of some of the financial covenants through March 31, 2021, according to a press release.

Service Properties will continue to have access to undrawn amounts under the credit facility.

In return for the temporary covenant relief and continued access to undrawn amounts under its credit facility, Service Properties agreed to the following temporary changes to its credit facility through March 31, 2021:

• An increase to the interest rate premium over Libor under its revolver and term loan by 50 basis points;

• Pledges of equity interests of subsidiaries owning properties with up to $3.2 billion of unencumbered gross asset value as of March 31;

• Requirement to maintain minimum unrestricted liquidity of $125 million – unrestricted cash or undrawn availability under its $1 billion revolving credit facility;

• Some additional covenants, including additional restrictions on Service Properties’ ability to incur debt, with exceptions for borrowings under its revolver and some other categories of secured and unsecured debt, and to acquire real property or make other investments, with exceptions for, among other things, some categories of capital expenditures and costs, and some share purchases;

• Limits on distributions on Service Properties’ common shares to amounts required to maintain its qualification for taxation as a real estate investment trust and to avoid the payment of some income and excise taxes, and to pay a cash dividend of $.01 per common share per quarter; and

• Requirement to apply the net cash proceeds from the disposition of assets, capital markets transactions, debt refinancings or Covid-19 government stimulus programs to the repayment of outstanding loans under the credit agreement.

Wells Fargo Securities, LLC, BofA Securities, Inc., PNC Capital Markets, LLC and RBC Capital Markets acted as joint lead arrangers and joint lead bookrunners on the amendment. Wells Fargo Bank, NA is the administrative agent. Bank of America, NA, PNC Bank, NA and Royal Bank of Canada are the syndication agents.

Service Properties Trust is a Newton, Mass.-based real estate investment trust that owns a portfolio of hotels and net lease service and necessity-based retail properties.

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