Item 1.01Entry into a Material Definitive Agreement.
On May 1, 2023, Sunstone Hotel Investors, Inc. (the “Company”) entered into a Term Loan Agreement (the “Term Loan Agreement”) among the Company, Sunstone Hotel Partnership, LLC, Bank of America, N.A., Wells Fargo Bank, National Association, JPMorgan Chase Bank, N.A., Regions Bank, Truist Bank, U.S. Bank National Association, Sumitomo Mitsui Banking Corporation and Bank of Hawaii. The Term Loan Agreement provides for a $225 million unsecured delayed draw term loan facility. BofA Securities, Inc., Wells Fargo Securities, LLC, JPMorgan Chase Bank, N.A., Regions Capital Markets, Truist Bank, and U.S. Bank National Association are joint lead arrangers, BofA Securities, Inc., Wells Fargo Securities, LLC and JPMorgan Chase Bank, N.A. are joint bookrunners, Wells Fargo Securities, LLC and JPMorgan Chase Bank, N.A. are syndication agents and Regions Bank, Truist Bank and U.S. Bank National Association are documentation agents. The Company’s operating partnership, Sunstone Hotel Partnership, LLC, is the borrower under the Term Loan Agreement and certain of the Company’s subsidiaries guarantee its obligations under the Term Loan Agreement.
The delayed draw term loan facility under the Term Loan Agreement matures on May 1, 2025. The Company may extend the maturity date of the delayed draw term loan facility under the Term Loan Agreement, exercisable one time, by twelve (12) months, to May 1, 2026, upon the payment of applicable fees and satisfaction of certain customary conditions. The Company also has the right to increase the delayed draw term loans, in an amount up to $50 million, for an aggregate facility of $275 million from lenders that are willing at such time to provide such increase or such delayed draw term loans.
Interest is paid on the amounts outstanding on the delayed draw term loans at varying rates, based upon Adjusted Term SOFR as defined in the Term Loan 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 Loans that are Adjusted
Term SOFR loans | Applicable Margin for loans that are
Base Rate Loans |
1 | Less than
3.00 to 1.00 | 1.35% | 0.35% |
2 | Greater than or equal to
3.00 to 1.00
but less than
3.50 to 1.00 | 1.40% | 0.40% |
3 | Greater than or equal to
3.50 to 1.00
but less than
4.00 to 1.00 | 1.45% | 0.45% |
4 | Greater than or equal to
4.00 to 1.00
but less than
5.00 to 1.00 | 1.55% | 0.55% |
5 | Greater than or equal to
5.00 to 1.00 but less than 5.50 to 1.00 | 1.75% | 0.75% |
6 | Greater than or equal to
5.50 to 1.00 but less than 6.00 to 1.00 | 1.85% | 0.85% |
7 | Greater than or equal to 6.00 to 1.00 | 2.20% | 1.20% |
