Chesapeake Lodging inks amended $200 million three-year revolver

By Susanna Moon

Chicago, Oct. 17 - Chesapeake Lodging, LP obtained a $200 million three-year senior secured revolving credit facility on Friday under amended credit terms with a syndicate led by Wells Fargo Bank, NA as administrative agent, according to an 8-K filing with the Securities and Exchange Commission.

The amended credit agreement boosts the loan limits from $150 million and also allows for more increases, for a maximum facility size of $300 million.

Interest on the loans will be Libor plus 275 basis points to 375 bps, based on leverage. The rate is initially Libor plus 325 bps. Under the previous terms, interest was Libor plus 375 bps, with a Libor floor of 2%.

The amended credit agreement matures in October 2014, with an option for a one-year extension.

JPMorgan Chase Bank, NA is syndication agent, and Deutsche Bank Securities Inc. is documentation agent. The company and some indirect subsidiaries are guarantors.

Borrowing availability under the amended credit agreement generally will be determined as the lesser of (a) 55% of the total operating property values of the hotel assets securing the facility and (b) the amount that would result in a debt service coverage ratio of at least 1.25x until March 31, 2013 and 1.35x after that.

The initial assets securing the facility are Hilton Checkers Los Angeles, Boston Marriott Newton, Courtyard Anaheim at Disneyland Resort, Homewood Suites Seattle Convention Center, Hotel Indigo San Diego Gaslamp Quarter and Hotel Adagio.

As of Oct. 14, the company had $100 million of outstanding debt under the amended credit agreement and about $49.1 million of additional borrowing availability.

Covenants include a requirement that the company maintain a maximum leverage ratio of 60% or less, or 55% during any extension period, of total assets; a fixed charge coverage ratio, of adjusted EBITDA divided by fixed charges, of at least 1.5 times; a minimum tangible net worth of at least $458.67 million plus 85% of the net cash proceeds from subsequent offerings of equity securities; and total operating property values for all of the hotels securing the facility of at least $250 million.

Negative covenants include limits on the company's ability to make investments aside from the fee simple or ground leased ownership of hotels and to make restricted payments such as dividend payments and share repurchases.

"We have significantly reduced our cost of borrowing, while at the same time increased the facility size and improved the facility covenants, which will provide us greater flexibility as we manage our capital structure through the current lodging cycle," Douglas W. Vicari, Chesapeake Lodging Trust's executive vice president, chief financial officer and treasurer, said in a company press release.

Chesapeake Lodging, LP is the operating partner of Chesapeake Lodging Trust, an Annapolis, Md.-based lodging real estate investment trust focused on investments primarily in upper-upscale hotels and convention markets and select-service and extended-stay hotels.

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