Ashford enters $100 million senior secured term loan with extensions

By Marisa Wong

Los Angeles, April 4 – Ashford Inc. entered into a credit agreement on April 1 for a $100 million senior secured term loan, according to an 8-K filing with the Securities and Exchange Commission.

Subsidiary Ashford Hospitality Holdings LLC is borrower, and subsidiaries Ashford Hospitality Advisors LLC and Ashford Hospitality Services LLC are co-borrowers under the credit agreement.

Mustang Lodging Funding LLC is administrative agent.

The credit facility includes a $50 million term loan funded on the closing date and commitments to fund up to an additional $50 million of term loans in up to five separate borrowings within 24 months after the closing date, subject to certain conditions.

The five-year interest-only facility has three successive one-year extension options subject to an increase in the interest rate during each extension period All outstanding principal is due at maturity.

Borrowings will bear interest at Libor, or a comparable or successor rate, subject to a floor of 0.25%, plus an applicable margin. The applicable margin will be 735 basis points, stepping up by 50 bps, 75 bps and 100 bps during each of the three extension periods, respectively.

A default rate will apply on all obligations in the event of default under the credit facility at 350 bps per annum above the otherwise applicable rate.

The credit facility does not require the maintenance of financial covenants, but if the leverage ratio is greater than 4x as of the end of any fiscal quarter during the term of the loan, including any extension period, then the borrower is required to apply 100% of the excess cash flow generated during that fiscal quarter to prepay the term loans.

During any extension period, the borrower is also required to apply 100% of the excess cash flow generated during that period to prepay the term loans.

The company may not pay dividends on its shares of common stock or preferred stock if the leverage ratio is greater than 3x after giving effect to the payment of those dividends.

Loan proceeds may be used for refinancing existing debt, working capital, capital expenditures and other general corporate purposes, including, among other things, property acquisitions; provided, however, not less than 50% of the proceeds of each term loan after the closing date shall be used for purposes of acquisitions, other investments and growth capital expenditures.

The credit agreement is guaranteed by Ashford, Ashford Hospitality Holdings and some subsidiaries of Ashford.

Ashford is a Dallas-based asset management company with a portfolio of businesses in the real estate and hospitality sectors.

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