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.”