Item 1.01.Entry Into a Material Definitive Agreement.
On July 25, 2022, Sunstone Hotel Investors, Inc. (the “Company”) entered into a Second Amended and Restated Credit Agreement (the “Amended Credit Agreement”) among the Company, Sunstone Hotel Partnership, LLC, Wells Fargo Bank, National Association, Bank of America, N.A., JPMorgan Chase Bank, N.A., PNC Bank, National Association, U.S. Bank National Association, Truist Bank, The Huntington National Bank, The Bank of Nova Scotia, Regions Bank and Bank of Hawaii. The Amended Credit Agreement provides for a $500 million unsecured revolving credit facility and two term loan facilities in the aggregate amount of $350 million. Wells Fargo Securities, LLC, BofA Securities, Inc., JPMorgan Chase Bank, N.A., PNC Capital Markets LLC, U.S. Bank National Association, Truist Securities, Inc., and The Huntington National Bank are joint lead arrangers, Wells Fargo Securities, LLC, BofA Securities, Inc., and JPMorgan Chase Bank, N.A. are joint bookrunners, Bank of America, N.A. and JPMorgan Chase Bank, N.A. are syndications agents, PNC Bank, National Association, U.S. Bank National Association, Truist Bank, and The Huntington National Bank are documentation agents, and J.P. Morgan Securities LLC is sustainability agent of the Amended Credit Agreement. The Company’s operating partnership, Sunstone Hotel Partnership, LLC, is the borrower under the Amended Credit Agreement and certain of the Company’s subsidiaries guarantee its obligations under the Amended Credit Agreement.
The revolving credit facility under the Amended Credit Agreement matures on July 25, 2026. The Company may extend the maturity date of the revolving credit facility under the Amended Credit Agreement, exercisable two times, by six (6) months for each extension, to July 25, 2027, upon the payment of applicable fees and satisfaction of certain customary conditions. The Company also has the right to increase the revolving portion of the Amended Credit Agreement, or to add term loans, in an amount up to $250 million, for an aggregate facility of $1.1 billion, in the case of each such increase, from lenders that are willing at such time to provide such increase or such term loans.
As part of the Amended Credit Agreement, the Company increased the aggregate amount of its two unsecured term loans from $108 million to $350 million. The two term loan facilities each have a balance of $175 million and mature in July 2027 and January 2028.
Interest is paid on the periodic advances on the revolving facility and amounts outstanding on the term loans at varying rates, based upon adjusted SOFR as defined in the Amended Credit Agreement plus an applicable margin. The applicable margin is based upon the Company’s ratio of net indebtedness to EBITDA, as follows:
| | | | | |
Level | Leverage Ratio | Applicable Margin for Revolving Loans that are SOFR Loans | Applicable Margin for Revolving Loans that are
Base Rate Loans | Applicable Margin for Term Loans that are
SOFR Loans | Applicable Margin for Term Loans that are
Base Rate Loans |
1 | Less than
3.00 to 1.00 | 1.40% | 0.40% | 1.35% | 0.35% |
2 | Greater than or equal to
3.00 to 1.00
but less than
3.50 to 1.00 | 1.45% | 0.45% | 1.40% | 0.40% |
3 | Greater than or equal to
3.50 to 1.00
but less than
4.00 to 1.00 | 1.50% | 0.50% | 1.45% | 0.45% |
4 | Greater than or equal to
4.00 to 1.00
but less than
5.00 to 1.00 | 1.60% | 0.60% | 1.55% | 0.55% |
5 | Greater than or equal to
5.00 to 1.00
but less than
5.50 to 1.00 | 1.80% | 0.80% | 1.75% | 0.75% |
6 | Greater than or equal to
5.50 to 1.00
but less than
6.00 to 1.00 | 1.95% | 0.95% | 1.85% | 0.85% |
7 | Greater than or equal to
6.00 to 1.00 | 2.25% | 1.25% | 2.20% | 1.20% |
