Service Properties Trust (SVC) amended the agreement governing its revolving credit facility and exercised its option to extend its maturity date to January 2023. The key terms of the amendment include:

• The revolving credit facility commitments have been reduced from $1 billion to $800 million;
• SVC can acquire up to an aggregate of $300 million of real property assets;
• SVC can fund up to an aggregate of $100 million of capital contributions required by Sonesta Holdco Corporation for business activities and to acquire additional shares of common stock of TravelCenters of America Inc., or TA, to retain its pro rata ownership of 8.2% of TA, an increase from the previous aggregate limit of $50 million;
• SVC will maintain minimum liquidity of $650 million until it repays its $500 million of 5.0% senior notes due in August 2022 and maintain at least $150 million of liquidity thereafter;
• The interest rate premium increased by 15 basis points and is subject to an additional 25 basis point increase if SVC does not satisfy certain financial covenants;
• SVC has one additional six-month extension option available beyond January 2023, subject to meeting certain conditions, including a $650 million minimum liquidity requirement until it repays or refinances its $500 million of 4.5% senior notes due June 2023. The minimum liquidity requirement for the second extension option is reduced to $150 million if SVC is in compliance with certain financial covenants, including the 1.5x ratio of consolidated income available for debt service to debt service ratio required to incur additional debt under its bond covenants;
• The existing waiver period has been extended to December 31, 2022, though the financial covenants will be tested and in full force and effect beginning with the quarter ending September 30, 2022 and have been modified as follows:
  
  • The required 1.5x fixed charge coverage ratio has been lowered to 1.0x through December 31, 2022 and increases back to 1.5x thereafter;
  • The required minimum liquidity has been increased from $125 million to $150 million; and
  • The required leverage ratio limit has been increased from 60% to 70%; and
  • SVC’s revolving credit facility will continue to be secured by 73 properties.

Brian Donley, Treasurer and Chief Financial Officer of SVC, made the following statement: “This amendment enhances our financial flexibility to assist our hotel operators as they recover from the effects of the pandemic. We believe both the maturity date and waiver extension, as well as the enhanced capacity to fund investment activities, best position SVC to execute on its long-term strategy.”

Wells Fargo Securities, BofA Securities, PNC Capital Markets and RBC Capital Markets acted as Joint Lead Arrangers and Joint Lead Bookrunners for the amendment to SVC’s revolving credit facility agreement. Wells Fargo Bank is the Administrative Agent for the facility. Bank of America, PNC Bank and Royal Bank of Canada are the Syndication Agents.