Summit Hotel (INN) Closes $600M Unsecured Credit Facility
Zacks Investment Research | Dec 12, 2018 07:52AM ET
Summit Hotel Properties, Inc. (NYSE:INN) recently fortified its balance sheet by restating the company’s unsecured credit facility, increasing the total capacity by $150 million to reach a total of $600 million. Further, the move has enabled the company to lower its borrowing cost.
Particularly, the credit facility comprised a $400-million unsecured revolving line of credit due in March 2023 and a $200-million senior unsecured term loan maturing in April 2024. There is also an option in the credit agreement for increasing the credit facility capacity by up to a total of $900 million.
For the revolving line of credit, pricing will range from an interest rate of LIBOR + 135 to 210 basis points (bps), while for the term loan the same will be at LIBOR + 135 to 210 bps, depending on the company's leverage ratio.
Notably, the company fully used its $200-million term loan to repay the former $450 million credit facility. Presently, the company’s 49 hotels are assumed to be unencumbered assets supporting the expanded credit facility.
Per management, these efforts will enable the company to improve its balance-sheet strength and maturity ladder. Furthermore, with the expected retirement of $107 million worth secured debt prior to the end of the year, the company’s weighted-average debt maturity will be more than five years. In fact, it will have no significant debt maturities until late 2022.
This recasting offers a cheaper line of credit to the company and helps reduce annualized interest expense. The move will also boost the company’s cash flow and alleviate its bottom-line pressure.
Moreover, extended maturities of the assumed debt will help improve its maturity profile and enjoy greater liquidity for day-to-day operations.
Over the past six months, shares of this Zacks Rank #4 (Sell) company have underperformed the Zacks Investment Research
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