RLJ Lodging Trust (the "Company") (NYSE: RLJ) today announced that it successfully completed a $700 million unsecured credit facility (the "Facility") that is expandable to $1.2 billion. The Facility consists of a five-year and a seven-year unsecured term loan for an aggregate amount of $400 million (the "Term Loans") and a $300 million unsecured revolving line of credit (the "Revolving Credit Facility"). The new Revolving Credit Facility replaces the Company’s existing revolver. As a result of these combined transactions, the Company expects to have significant interest expense savings of approximately eight to ten million dollars in 2013.
“These transactions strengthen our balance sheet and demonstrate our commitment to maintain a conservative capital structure," said Thomas J. Baltimore, Jr., President and Chief Executive Officer. “By adding unsecured debt to our capital structure, we were able to take our first significant step towards becoming investment grade.”
Proceeds from the Term Loans were used to pay down approximately $70 million of the $85 million outstanding on the Company’s Revolving Credit Facility and retire four secured mortgage loans, totaling approximately $330 million that were scheduled to mature in 2013. Upon retiring these loans, four key assets were unencumbered, including the Company’s largest asset the DoubleTree by Hilton Metropolitan New York City. As a result, the Company’s unencumbered hotels increased from 53 to 57 hotels and now represent approximately 52% of the total portfolio’s 2011 hotel EBITDA.
The interest rates for the Term Loans are based on a pricing grid tied to the Company’s leverage ratio. At closing, the Company’s third quarter leverage ratio resulted in blended term loan pricing that was more than 300 basis points lower than the 5.8% weighted average interest rate of the four loans that were paid off.
In addition to retiring four higher priced mortgaged loans; the Company’s Revolving Credit Facility was amended and restated with favorable terms and conditions, including a maturity extension of an incremental two and a half years beyond the current year and a half remaining, improved financial covenants, and a reduction of approximately 65 basis points on average across the pricing grid.