CHICAGO, – Strategic Hotels & Resorts, Inc. (NYSE: BEE) today announced that it has closed a new $750.0 million unsecured credit facility with an accordion feature allowing for additional borrowing capacity up to $1.0 billion. The new facility is comprised of a $450.0 million unsecured revolving credit facility and a $300.0 million unsecured term loan. The new facility replaces a $300.0 million stock secured revolving credit facility.
The new revolving credit facility’s interest rate is based upon a leverage-based pricing grid ranging from LIBOR plus 165 basis points to LIBOR plus 240 basis points. Initial pricing will be LIBOR plus 165 basis points, which is a reduction from the previous facility’s pricing of LIBOR plus 200 basis points. The new term loan’s interest rate is also based upon a leveraged based pricing grid ranging from LIBOR plus 160 basis points to LIBOR plus 235 basis points. Initial pricing will be LIBOR plus 160 basis points. At closing, the Company has $80.0 million outstanding on the revolving credit facility in addition to the $300.0 million funded unsecured term loan. The combined unsecured facility has a five-year term and will mature in May 2020.
The unsecured facility is supported by a pool of unencumbered assets that will initially consist of nine of the company’s hotels: the Fairmont Chicago, Fairmont Scottsdale Princess, Four Seasons Austin, Four Seasons Jackson Hole, Four Seasons Scottsdale Resort at Troon North, Four Seasons Silicon Valley, Marriott Lincolnshire, Ritz-Carlton Laguna Niguel and Westin St. Francis.
In addition, the Company closed a $115.0 million term loan secured by the Ritz-Carlton Half Moon Bay hotel. Under terms of the agreement, the loan bears interest at a floating rate of LIBOR plus 240 basis points and has a five-year initial term with two, one-year extension options available to the Company upon satisfying certain financial and other conditions. Deutsche Bank Securities Inc. originated the financing.
Simultaneously, the Company repaid the previously outstanding $209.6 million loan encumbered by the Westin St. Francis and the $93.1 million loan encumbered by the Fairmont Chicago that were cross-collateralized, priced at a fixed interest rate of 6.09 percent and set to mature in June 2017. The repayment will eliminate approximately $18.9 million of annual interest expense. In connection with the repayment, the Company paid a prepayment penalty totaling approximately $32.9 million.
“We proactively took advantage of the favorable capital markets to further transform our balance sheet, resulting in significant flexibility with nine unencumbered assets,” commented Diane Morefield, Chief Financial Officer of Strategic Hotels & Resorts. “In addition, we have lowered our overall cost of debt and extended our maturity profile, with our next debt maturity not occurring until 2018.”
Combined, the financing activity is expected to reduce the Company’s interest expense by approximately $6.4 million for the remaining six months of 2015, lower its overall weighted average cost of debt to 3.2 percent and increase the Company’s weighted average maturity to nearly five years.
Deutsche Bank Securities Inc., JP Morgan Securities LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated served as Co-Lead Arrangers for the unsecured credit facility. Deutsche Bank AG New York Branch served as Administrative Agent and JP Morgan Chase Bank, N.A and Bank of America, N.A. served as Syndication Agents. BMO Harris Bank, N.A., Capital One Bank, N.A., PNC Bank, and Wells Fargo Bank served as Co-Documentation agents. Sumitomo Mitsui Banking Corporation, Fifth Third Bank, U.S. Bank National Association, Barclays Bank PLC, Raymond James Bank, N.A., The PrivateBank and Trust Company and MidFirst Bank are additional participating banks.
About the Company
Strategic Hotels & Resorts, Inc. is a real estate investment trust (REIT) which owns and provides value enhancing asset management of high-end hotels and resorts in the United States and Europe. The Company currently has ownership interests in 18 properties with an aggregate of 8,199 rooms and 851,000 square feet of multi-purpose meeting and banqueting space. For a list of current properties and for further information, please visit the Company’s website at www.strategichotels.com.