Hersha Hospitality Trust Announces New Senior Unsecured Credit Facility of $400 Million Expandable to $550 Million
Hersha Hospitality Trust (NYSE: HT) (the “Company”), owner of upscale hotels in urban gateway markets, today announced that its operating partnership, Hersha Hospitality Limited Partnership (the “Borrower”), has received commitments for a new $400 million senior unsecured credit facility that is expandable to $550 million at the Borrower's request (the “Facility”). The Facility will consist of a senior unsecured revolving line of credit (the “Revolving Credit Facility”) in an initial amount of $250 million and a senior unsecured term loan (the “Term Loan”) in a principal amount of up to $150 million. The Facility will replace the Company's $250 million senior secured revolving credit facility. It is expected to close, subject to the satisfaction of customary closing conditions, within the next 30 days.
The Revolving Credit Facility will be unsecured and will mature three years from the closing date. The Borrower will have the right to extend the lenders' commitments under the Revolving Credit Facility for an additional one-year period, subject to the satisfaction of certain conditions. The interest rate for the new credit Facility will be based on a pricing grid with a range of 175 to 265 basis points over LIBOR, based on the Company's leverage ratio for an all-in rate, inclusive of swaps, of 2.60% to 3.50%.
“We are encouraged by our ability to access the debt capital markets and the support of our bank group. The new Facility will meaningfully strengthen our balance sheet and provide us with greater financial flexibility,” commented Ashish R. Parikh, Chief Financial Officer. “This transaction will significantly reduce our weighted average cost of debt and enhance our liquidity position by over half a billion dollars. By eliminating the floor pricing on our existing secured credit facility and refinancing existing mortgage debt with the new Term Loan, we estimate a reduction of interest expense of approximately $2.5 million on an annual basis. Furthermore, our access to unsecured debt financing will reduce our reliance on the secured debt markets, further validating the quality of our portfolio and the conservative balance sheet strategy we have undertaken.”
The Term Loan will be funded as a single draw of $100 million on the closing date and up to $50 million will be available on a delayed draw basis for up to 60 days after the closing date. The Term Loan will mature three years from the closing date. The Borrower will have the right to extend the maturity date of the Term Loan for two additional one-year periods, subject to the satisfaction of certain conditions. The proceeds from the Term Loan's initial advance will be used to pay off the existing balance on the secured revolving credit facility, pay off the balance on mortgage loans at eight hotel properties, and for general corporate purposes. The mortgage loans being paid off have an outstanding balance of $102 million and a weighted average interest rate of 5.20% as of September 30, 2012.
The Facility is being arranged by Citigroup Global Markets Inc. and Wells Fargo Securities, LLC, as Joint Lead Arrangers and Book Running Managers. Bank of America, N.A., Manufacturers and Traders Trust Company, Raymond James Bank, N.A. and TD Bank, N.A. will act as Co-Documentation Agents.
About Hersha Hospitality Trust
Hersha Hospitality Trust is a self-advised real estate investment trust, which owns 64 hotels in major urban gateway markets including New York, Washington, Boston, Philadelphia, Los Angeles and Miami totaling 9,221 rooms. HT follows a highly selective investment approach and leverages operational advantage through rigorous and sustainable asset management practices. For further information on the Company visit our website at www.hersha.com.
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and, as such, may involve known and unknown risks, uncertainties and other factors that may cause the actual results or performance to differ from those reflected in the forward-looking statement. Although the Company has obtained commitments for the Facility discussed in this press release, no assurance can be given that the Facility will close on the terms described in this press release or at all or the Company. If the Facility does not close, the Company may not be able to achieve the reduction in interest expense described in this press release. For a description of these factors, please review the information under the heading “Risk Factors” included in Hersha Hospitality Trust's Annual Report on Form 10-K for the year ended December 31, 2011, filed with the U.S. Securities Exchange Commission.
Hersha Hospitality Trust
Ashish Parikh, 215-238-1046