Debt | 6. DEBT Summary Outstanding Principal Interest Rate Stated June 30, December 31, Stated Interest June 30, December 31, Loan Amount 2015 2014 Rate 2015 2014 Maturity Date Amortization Mortgage loans 2012 Mortgage Loan - Component A $ 350,000 $ 29,272 $ 348,049 LIBOR (1)(2) 2.9737 % 2.2260 % 12/1/2015 (3) Interest only 2012 Mortgage Loan - Component B 350,000 168,000 350,000 3.4047% 3.4047 % 3.4047 % 12/1/2017 Interest only 2012 Mortgage Loan - Component C 1,820,000 1,820,000 1,820,000 4.0547% 4.0547 % 4.0547 % 12/1/2019 Interest only Term loan facility 2014 Term Loan (4) 375,000 364,970 373,320 LIBOR (1)(5) 5.00 % 5.00 % 6/24/2019 Interest only (6) Senior notes 2025 Notes 500,000 500,000 — 5.25% 5.25 % N/A 5/1/2025 Interest only Revolving credit facilities ESH REIT Revolving Credit Facility 250,000 (8) — — LIBOR (1) N/A N/A 11/18/2016 (7) Interest only Corporation Revolving Credit Facility 50,000 — — LIBOR (1) N/A N/A 11/18/2016 (7) Interest only Total $ 2,882,242 $ 2,891,369 (1) London Interbank Offering Rate. (2) ESH REIT is a counterparty to an interest rate cap on one-month LIBOR at 3.0% with a notional amount of approximately $348.0 million and a maturity date the same as that of Component A of the 2012 Mortgage Loan. (3) ESH REIT has the option to extend the maturity date for two consecutive one-year periods, subject to limited conditions. (4) As of June 30, 2015 and December 31, 2014, the 2014 Term Loan is presented net of an unaccreted discount of approximately $1.5 million and $1.7 million, respectively. (5) The 2014 Term Loan includes a LIBOR floor of 0.75%. (6) There is no scheduled amortization on the 2014 Term Loan; however, subject to certain exceptions, mandatory prepayments are required up to 50% of Excess Cash Flow based on ESH REIT’s Consolidated Leverage Ratio, each as defined. ESH REIT made a mandatory prepayment of approximately $8.5 million during the three months ended March 31, 2015. An additional mandatory prepayment may be required during the three months ending March 31, 2016 based on the calculation of the Excess Cash Flow for the year ending December 31, 2015. (7) Each revolving credit facility is subject to a one-year extension option. (8) ESH REIT is able to request to increase the facility to an amount up to $350.0 million at any time, subject to certain criteria. On May 15, 2015, using the proceeds from its 2025 Notes (as defined below), ESH REIT repaid $500.0 million of the outstanding balance under its 2012 Mortgage Loan (as defined below), which consisted of $318.0 million of Component A and $182.0 million of Component B. During the three and six months ended June 30, 2015, ESH REIT incurred approximately $2.3 million of debt extinguishment costs in connection with the partial repayment of the 2012 Mortgage Loan, consisting of the write-off of unamortized deferred financing costs of approximately $1.7 million and other costs of approximately $0.6 million. On June 23, 2014, using principally all of the net proceeds from its 2014 Term Loan (as defined below), ESH REIT repaid the remaining outstanding balance of $365.0 million of its 2012 Mezzanine Loans (as defined below). During the three and six months ended June 30, 2014, ESH REIT incurred approximately $9.4 million of debt extinguishment costs in connection with the repayment of the 2012 Mezzanine Loans, consisting of the write-off of unamortized deferred financing costs of approximately $5.1 million and prepayment penalties and other costs of approximately $4.3 million. Debt extinguishment costs are included as a component of net interest expense in the accompanying unaudited condensed consolidated statements of operations. ESH REIT Mortgage Loans On November 30, 2012, ESH REIT entered into a $2.52 billion mortgage loan comprised of three components (the “2012 Mortgage Loan”). On May 15, 2015, ESH REIT repaid $500.0 million of its 2012 Mortgage Loan using the proceeds from its 2025 Notes, which reduced the monthly required interest-only payments from approximately $7.9 million to approximately $6.8 million. Principal amounts, interest rates and maturities of components of the 2012 Mortgage Loan are included in the table above. ESH REIT has the option to extend the maturity date of Component A for up to two consecutive one-year periods, subject to certain conditions. The 2015 extension conditions include adequate written notice of such extension, the extension or renewal of an interest rate cap, and the requirement that none of the borrowing entities be in default, as defined. The 2016 extension conditions include the same conditions as the 2015 extension, as well as the requirement of an Extension Debt Yield, as defined, of at least 17.5%. Substantially all of ESH REIT’s hotel properties serve as collateral for the 2012 Mortgage Loan. Under certain limited circumstances, losses related to the 2012 Mortgage Loan and costs incurred by the lenders are guaranteed by certain of the Corporation’s subsidiaries up to an aggregate liability of $252.0 million. The occurrence of a Mortgage Loan Event of Default, a Debt Yield Trigger Event (a Debt Yield, as defined, of less than 9.0%), or a Guarantor Bankruptcy triggers a Cash Trap Event, each as defined. During the period of a Cash Trap Event, any excess cash flow, after all monthly requirements (including the payment of management fees and operating expenses) are fully funded, is held by the loan service agent as additional collateral for the 2012 Mortgage Loan. As of June 30, 2015, none of these events had occurred. ESH REIT Term Loan Facility On June 23, 2014, ESH REIT entered into a $375.0 million term loan facility (the “2014 Term Loan”). ESH REIT used principally all of the 2014 Term Loan net proceeds to repay the outstanding balance on its 2012 Mezzanine Loans of $365.0 million. Subject to certain conditions, the principal amount of the 2014 Term Loan may be increased from time to time up to an amount which would not cause the Consolidated Leverage Ratio, as defined, to exceed 5.25 to 1.0. The 2014 Term Loan matures on June 24, 2019 and bears interest at a rate equal to (i) LIBOR (subject to a floor of 0.75%) plus 4.25%, or (ii) a base rate (determined by reference to the highest of (1) the prime lending rate, (2) the overnight federal funds rate plus 0.5%, or (3) the one-month adjusted LIBOR rate (subject to a floor of 0.75%) plus 1.0%) plus 3.25%. There is no scheduled amortization on the 2014 Term Loan; however, subject to certain exceptions, mandatory prepayments are required up to 50% of Excess Cash Flow, based on ESH REIT’s Consolidated Leverage Ratio, each as defined. For the period from July 1, 2014 through December 31, 2014, ESH REIT’s Excess Cash Flow, as defined, totaled approximately $17.1 million, which required ESH REIT to make a mandatory prepayment of approximately $8.5 million during the three months ended March 31, 2015. An additional mandatory prepayment may be required during the three months ending March 31, 2016 based on the calculation of the Excess Cash Flow for the year ending December 31, 2015. As of June 30, 2015 and December 31, 2014, the outstanding balance on the 2014 Term Loan was approximately $365.0 million and $373.3 million, respectively, net of an unaccreted discount of approximately $1.5 million and $1.7 million, respectively. Obligations under the 2014 Term Loan are guaranteed by certain of ESH REIT’s existing and future direct and indirect domestic subsidiaries, with certain exceptions, including certain entities that may not be pledged pursuant to the 2012 Mortgage Loan. The 2014 Term Loan is secured by a first-priority security interest in substantially all of the assets of ESH REIT and the guarantors under the facility on a pari passu basis with its obligations under the ESH REIT Revolving Credit Facility (as defined below), with certain exceptions, including certain entities that may not be pledged pursuant to the 2012 Mortgage Loan. The 2014 Term Loan may be repaid prior to its maturity, subject to the following prepayment penalties: (a) on or after June 24, 2015 but prior to December 24, 2015, an amount equal to 2.0% of the aggregate principal amount repaid and (b) on or after December 24, 2015 but prior to June 24, 2016, an amount equal to 1.0% of the aggregate principal amount repaid. Repayments on or after June 24, 2016 require no prepayment penalty. During a Trigger Event, an Adjusted Trigger Event, a Default or an Event of Default, each as defined, ESH REIT is restricted from making cash distributions, subject to certain exceptions. As of June 30, 2015, none of these events had occurred. ESH REIT Senior Notes On May 15, 2015, ESH REIT issued $500.0 million of 5.25% senior notes due in 2025 (the “2025 Notes”) under an indenture (the “Indenture”) with Deutsche Bank Trust Company Americas, as trustee, at a price equal to 100% of their par value in a private placement pursuant to Rule 144A of the Securities Act of 1933, as amended. ESH REIT used the proceeds and cash on hand to repay $500.0 million of the outstanding balance under its 2012 Mortgage Loan. The 2025 Notes mature on May 1, 2025 and bear interest at a fixed rate of 5.25% per annum, payable semi-annually in arrears on May 1 and November 1 of each year, beginning November 1, 2015. In connection with the issuance of the 2025 Notes, ESH REIT incurred costs of approximately $11.5 million, inclusive of underwriter, credit rating agency and attorney fees and other costs. These issuance costs are included in deferred financing costs in the accompanying unaudited condensed consolidated balance sheet as of June 30, 2015 and will be amortized to net interest expense over the term of the 2025 Notes. The 2025 Notes are fully and unconditionally guaranteed, jointly and severally, on an unsecured basis by each of ESH REIT’s subsidiaries that guarantee ESH REIT’s obligations under the 2014 Term Loan and the ESH REIT Revolving Credit Facility. The 2025 Notes rank equally in right of payment with ESH REIT’s existing and future senior unsecured indebtedness, and senior in right of payment to all future subordinated indebtedness, if any. The 2025 Notes are effectively junior to any of ESH REIT’s secured indebtedness to the extent of the value of the assets securing such indebtedness. ESH REIT may redeem the 2025 Notes at any time on or after May 1, 2020, in whole or in part, at a redemption price equal to 102.625% of the principal amount, declining annually to 100% of the principal amount from May 1, 2023 and thereafter, plus accrued and unpaid interest. Prior to May 1, 2020, ESH REIT may redeem the 2025 Notes, in whole or in part, at a redemption price equal to 100% of the principal amount, plus a “make-whole” premium, as defined in the Indenture, plus accrued and unpaid interest. Prior to May 1, 2018, subject to certain conditions, ESH REIT may redeem up to 35% of the aggregate principal amount of the 2025 Notes at a redemption price equal to 105.250% of the aggregate principal amount thereof, plus accrued and unpaid interest, with the net cash proceeds from certain equity offerings, provided 65% of the original amount of the principal remains outstanding after the occurrence of each such redemption. Upon a Change of Control, as defined, holders of the 2025 Notes have the right to require ESH REIT to redeem the 2025 Notes at 101% of the principal amount, plus accrued and unpaid interest. The Indenture contains a number of customary covenants that, subject to certain exceptions, limit ESH REIT’s ability and the ability of certain of its subsidiaries to incur additional debt, create certain liens, pay dividends or distributions, make certain investments and other payments, enter into affiliate transactions, sell assets or merge, consolidate or transfer substantially all of their assets, among other things. ESH REIT was in compliance with all covenants set forth in the Indenture as of June 30, 2015. Revolving Credit Facilities ESH REIT Revolving Credit Facility— ESH REIT’s obligations under the ESH REIT Revolving Credit Facility are guaranteed by its existing and future and indirect domestic subsidiaries, with certain exceptions, including certain entities that may not provide guarantees pursuant to the 2012 Mortgage Loan. The ESH REIT Revolving Credit Facility is secured by a first-priority security interest in substantially all of the assets of ESH REIT and the guarantors under the facility, with certain exceptions, including certain entities that may not be pledged pursuant to the 2012 Mortgage Loan. In order to avoid a Trigger Event or an Adjusted Trigger Event, the ESH REIT Revolving Credit Facility requires a Debt Yield and an Adjusted Debt Yield, each as defined, of at least 11.5%, and, to avoid an Event of Default, a Consolidated Leverage Ratio, as defined, of no more than 9.25 to 1.0 (with the requirement decreasing to no more than 9.0 to 1.0 over the remaining life of the facility) and a Debt Yield or Adjusted Debt Yield of at least 9.0%. The occurrence of a Trigger Event or an Adjusted Trigger Event requires ESH REIT to repay the outstanding facility balance and restricts its ability to draw additional proceeds. As of June 30, 2015, none of these events had occurred. Corporation Revolving Credit Facility— The Corporation’s obligations under the Corporation Revolving Credit Facility are guaranteed by its existing and future direct and indirect domestic subsidiaries, with certain exceptions, including, but not limited to, ESH REIT and its subsidiaries and certain other entities that may not provide guarantees pursuant to ESH REIT’s 2012 Mortgage Loan and 2014 Term Loan. The Corporation Revolving Credit Facility is secured by a first-priority security interest in substantially all of the assets of the Corporation and the guarantors under the facility, with certain exceptions, including certain entities that may not be pledged pursuant to the 2012 Mortgage Loan and 2014 Term Loan. In order to avoid a Trigger Event or an Adjusted Trigger Event, the Corporation Revolving Credit Facility requires a Debt Yield and an Adjusted Debt Yield, each as defined, of at least 12.0%, and, to avoid an Event of Default, a Consolidated Leverage Ratio, as defined, of no more than 9.0 to 1.0 (with the requirement decreasing to no more than 8.75 to 1.0 over the remaining life of the facility) and a Debt Yield or Adjusted Debt Yield of at least 9.0%. The occurrence of a Trigger Event or an Adjusted Trigger Event requires the Corporation to repay the outstanding facility balance and restricts its ability to make additional borrowings. As of June 30, 2015, none of these events had occurred. ESH REIT Mezzanine Loans On November 30, 2012, ESH REIT entered into three mezzanine loans totaling $1.08 billion (the “2012 Mezzanine Loans”). The 2012 Mezzanine Loans would have matured on December 1, 2019, with all outstanding principal and unpaid interest due on that date; however, during 2013, ESH REIT repaid $715.0 million of the 2012 Mezzanine Loans and on June 23, 2014, using principally all of the net proceeds from its 2014 Term Loan, ESH REIT repaid the remaining outstanding balance of $365.0 million of the 2012 Mezzanine Loans, which had a weighted-average interest rate of 9.4%. Future Maturities of Debt Years Ending December 31, Remainder of 2015 $ 29,272 (1) 2016 — 2017 168,000 2018 — 2019 2,184,970 (2) Thereafter 500,000 Total $ 2,882,242 (1) ESH REIT has the option to extend the maturity date of Component A of the 2012 Mortgage Loan for two consecutive one-year periods, subject to limited conditions. (2) The 2014 Term Loan is presented net of an unaccreted discount of approximately $1.5 million. Subject to certain exceptions, mandatory prepayments are required up to 50% of Excess Cash Flow based on ESH REIT’s Consolidated Leverage Ratio, each as defined. ESH REIT made a mandatory prepayment of approximately $8.5 million during the three months ended March 31, 2015. An additional mandatory prepayment may be required during the three months ending March 31, 2016 based on the calculation of the Excess Cash Flow for the year ending December 31, 2015. Fair Value of Debt |
Debt | 5. DEBT Summary Outstanding Principal Interest Rate Stated June 30, December 31, Stated Interest June 30, December 31, Loan Amount 2015 2014 Rate 2015 2014 Maturity Date Amortization Mortgage loans 2012 Mortgage Loan - Component A $ 350,000 $ 29,272 $ 348,049 LIBOR (1)(2) % 2.9737 % 2.2260 % 12/1/2015 (3) Interest only 2012 Mortgage Loan - Component B 350,000 168,000 350,000 3.4047 % 3.4047 % 3.4047 % 12/1/2017 Interest only 2012 Mortgage Loan - Component C 1,820,000 1,820,000 1,820,000 4.0547 % 4.0547 % 4.0547 % 12/1/2019 Interest only Term loan facility 2014 Term Loan (4) 375,000 364,970 373,320 LIBOR (1)(5) % 5.00 % 5.00 % 6/24/2019 Interest only (6) Senior notes 2025 Notes 500,000 500,000 — 5.25 % 5.25 % N/A 5/1/2025 Interest only Revolving credit facility ESH REIT Revolving Credit Facility 250,000 (8) — — LIBOR (1) % N/A N/A 11/18/2016 (7) Interest only Total $ 2,882,242 $ 2,891,369 (1) London Interbank Offering Rate. (2) ESH REIT is a counterparty to an interest rate cap on one-month LIBOR at 3.0% with a notional amount of approximately $348.0 million and a maturity date the same as that of Component A of the 2012 Mortgage Loan. (3) ESH REIT has the option to extend the maturity date for two consecutive one-year periods, subject to limited conditions. (4) As of June 30, 2015 and December 31, 2014, the 2014 Term Loan is presented net of an unaccreted discount of approximately $1.5 million and $1.7 million, respectively. (5) The 2014 Term Loan includes a LIBOR floor of 0.75%. (6) There is no scheduled amortization on the 2014 Term Loan; however, subject to certain exceptions, mandatory prepayments are required up to 50% of Excess Cash Flow based on ESH REIT’s Consolidated Leverage Ratio, each as defined. ESH REIT made a mandatory prepayment of approximately $8.5 million during the three months ended March 31, 2015. An additional mandatory prepayment may be required during the three months ending March 31, 2016 based on the calculation of the Excess Cash Flow for the year ending December 31, 2015. (7) The ESH REIT revolving credit facility is subject to a one-year extension option. (8) ESH REIT is able to request to increase the facility to an amount up to $350.0 million at any time, subject to certain criteria. On May 15, 2015, using the proceeds from its 2025 Notes (as defined below), ESH REIT repaid $500.0 million of the outstanding balance under its 2012 Mortgage Loan (as defined below), which consisted of $318.0 million of Component A and $182.0 million of Component B. During the three and six months ended June 30, 2015, ESH REIT incurred approximately $2.3 million of debt extinguishment costs in connection with the partial repayment of the 2012 Mortgage Loan, consisting of the write-off of unamortized deferred financing costs of approximately $1.7 million and other costs of approximately $0.6 million. On June 23, 2014, using principally all of the net proceeds from its 2014 Term Loan (as defined below), ESH REIT repaid the remaining outstanding balance of $365.0 million of its 2012 Mezzanine Loans (as defined below). During the three and six months ended June 30, 2014, ESH REIT incurred approximately $9.4 million of debt extinguishment costs in connection with the repayment of the 2012 Mezzanine Loans, consisting of the write-off of unamortized deferred financing costs of approximately $5.1 million and prepayment penalties and other costs of approximately $4.3 million. Debt extinguishment costs are included as a component of net interest expense in the accompanying unaudited condensed consolidated statements of operations. ESH REIT Mortgage Loans On November 30, 2012, ESH REIT entered into a $2.52 billion mortgage loan comprised of three components (the “2012 Mortgage Loan”). On May 15, 2015, ESH REIT repaid $500.0 million of its 2012 Mortgage Loan using the proceeds from its 2025 Notes, which reduced the monthly required interest-only payments from approximately $7.9 million to approximately $6.8 million. Principal amounts, interest rates and maturities of components of the 2012 Mortgage Loan are included in the table above. ESH REIT has the option to extend the maturity date of Component A for up to two consecutive one-year periods, subject to certain conditions. The 2015 extension conditions include adequate written notice of such extension, the extension or renewal of an interest rate cap, and the requirement that none of the borrowing entities be in default, as defined. The 2016 extension conditions include the same conditions as the 2015 extension, as well as the requirement of an Extension Debt Yield, as defined, of at least 17.5%. Substantially all of ESH REIT’s hotel properties serve as collateral for the 2012 Mortgage Loan. Under certain limited circumstances, losses related to the 2012 Mortgage Loan and costs incurred by the lenders are guaranteed by certain of the Corporation’s subsidiaries up to an aggregate liability of $252.0 million. The occurrence of a Mortgage Loan Event of Default, a Debt Yield Trigger Event (a Debt Yield, as defined, of less than 9.0%), or a Guarantor Bankruptcy triggers a Cash Trap Event, each as defined. During the period of a Cash Trap Event, any excess cash flow, after all monthly requirements (including the payment of management fees and operating expenses) are fully funded, is held by the loan service agent as additional collateral for the 2012 Mortgage Loan. As of June 30, 2015, none of these events had occurred. ESH REIT Term Loan Facility On June 23, 2014, ESH REIT entered into a $375.0 million term loan facility (the “2014 Term Loan”). ESH REIT used principally all of the 2014 Term Loan net proceeds to repay the outstanding balance on its 2012 Mezzanine Loans of $365.0 million. Subject to certain conditions, the principal amount of the 2014 Term Loan may be increased from time to time up to an amount which would not cause the Consolidated Leverage Ratio, as defined, to exceed 5.25 to 1.0. The 2014 Term Loan matures on June 24, 2019 and bears interest at a rate equal to (i) LIBOR (subject to a floor of 0.75%) plus 4.25%, or (ii) a base rate (determined by reference to the highest of (1) the prime lending rate, (2) the overnight federal funds rate plus 0.5%, or (3) the one-month adjusted LIBOR rate (subject to a floor of 0.75%) plus 1.0%) plus 3.25%. There is no scheduled amortization on the 2014 Term Loan; however, subject to certain exceptions, mandatory prepayments are required up to 50% of Excess Cash Flow, based on ESH REIT’s Consolidated Leverage Ratio, each as defined. For the period from July 1, 2014 through December 31, 2014, ESH REIT’s Excess Cash Flow, as defined, totaled approximately $17.1 million, which required ESH REIT to make a mandatory prepayment of approximately $8.5 million during the three months ended March 31, 2015. An additional mandatory prepayment may be required during the three months ending March 31, 2016 based on the calculation of the Excess Cash Flow for the year ending December 31, 2015. As of June 30, 2015 and December 31, 2014, the outstanding balance on the 2014 Term Loan was approximately $365.0 million and $373.3 million, respectively, net of an unaccreted discount of approximately $1.5 million and $1.7 million, respectively. Obligations under the 2014 Term Loan are guaranteed by certain of ESH REIT’s existing and future direct and indirect domestic subsidiaries, with certain exceptions, including certain entities that may not be pledged pursuant to the 2012 Mortgage Loan. The 2014 Term Loan is secured by a first-priority security interest in substantially all of the assets of ESH REIT and the guarantors under the facility on a pari passu basis with its obligations under the ESH REIT Revolving Credit Facility (as defined below), with certain exceptions, including certain entities that may not be pledged pursuant to the 2012 Mortgage Loan. The 2014 Term Loan may be repaid prior to its maturity, subject to the following prepayment penalties: (a) on or after June 24, 2015 but prior to December 24, 2015, an amount equal to 2.0% of the aggregate principal amount repaid and (b) on or after December 24, 2015 but prior to June 24, 2016, an amount equal to 1.0% of the aggregate principal amount repaid. Repayments on or after June 24, 2016 require no prepayment penalty. During a Trigger Event, an Adjusted Trigger Event, a Default or an Event of Default, each as defined, ESH REIT is restricted from making cash distributions, subject to certain exceptions. As of June 30, 2015, none of these events had occurred. ESH REIT Senior Notes On May 15, 2015, ESH REIT issued $500.0 million of 5.25% senior notes due in 2025 (the “2025 Notes”) under an indenture (the “Indenture”) with Deutsche Bank Trust Company Americas, as trustee, at a price equal to 100% of their par value in a private placement pursuant to Rule 144A of the Securities Act of 1933, as amended. ESH REIT used the proceeds and cash on hand to repay $500.0 million of the outstanding balance under its 2012 Mortgage Loan. The 2025 Notes mature on May 1, 2025 and bear interest at a fixed rate of 5.25% per annum, payable semi-annually in arrears on May 1 and November 1 of each year, beginning November 1, 2015. In connection with the issuance of the 2025 Notes, ESH REIT incurred costs of approximately $11.5 million, inclusive of underwriter, credit rating agency and attorney fees and other costs. These issuance costs are included in deferred financing costs in the accompanying unaudited condensed consolidated balance sheet as of June 30, 2015 and will be amortized to net interest expense over the term of the 2025 Notes. The 2025 Notes are fully and unconditionally guaranteed, jointly and severally, on an unsecured basis by each of ESH REIT’s subsidiaries that guarantee ESH REIT’s obligations under the 2014 Term Loan and the ESH REIT Revolving Credit Facility. The 2025 Notes rank equally in right of payment with ESH REIT’s existing and future senior unsecured indebtedness, and senior in right of payment to all future subordinated indebtedness, if any. The 2025 Notes are effectively junior to any of ESH REIT’s secured indebtedness to the extent of the value of the assets securing such indebtedness. ESH REIT may redeem the 2025 Notes at any time on or after May 1, 2020, in whole or in part, at a redemption price equal to 102.625% of the principal amount, declining annually to 100% of the principal amount from May 1, 2023 and thereafter, plus accrued and unpaid interest. Prior to May 1, 2020, ESH REIT may redeem the 2025 Notes, in whole or in part, at a redemption price equal to 100% of the principal amount, plus a “make-whole” premium, as defined in the Indenture, plus accrued and unpaid interest. Prior to May 1, 2018, subject to certain conditions, ESH REIT may redeem up to 35% of the aggregate principal amount of the 2025 Notes at a redemption price equal to 105.250% of the aggregate principal amount thereof, plus accrued and unpaid interest, with the net cash proceeds from certain equity offerings, provided 65% of the original amount of the principal remains outstanding after the occurrence of each such redemption. Upon a Change of Control, as defined, holders of the 2025 Notes have the right to require ESH REIT to redeem the 2025 Notes at 101% of the principal amount, plus accrued and unpaid interest. The Indenture contains a number of customary covenants that, subject to certain exceptions, limit ESH REIT’s ability and the ability of certain of its subsidiaries to incur additional debt, create certain liens, pay dividends or distributions, make certain investments and other payments, enter into affiliate transactions, sell assets or merge, consolidate or transfer substantially all of their assets, among other things. ESH REIT was in compliance with all covenants set forth in the Indenture as of June 30, 2015. ESH REIT Revolving Credit Facility On November 18, 2013, ESH REIT entered into a $250.0 million revolving credit facility (the “ESH REIT Revolving Credit Facility”). Subject to the satisfaction of certain criteria, ESH REIT is able to request to increase the facility to an amount up to $350.0 million at any time. The facility provides for the issuance of up to $50.0 million of letters of credit as well as borrowings on same day notice, referred to as swingline loans, in an amount up to $20.0 million. ESH REIT incurs a fee of 0.35% or 0.175% on the unutilized revolver balance, based on the outstanding amount under the facility, and a fee of 3.125% on outstanding letters of credit due on the last day of each quarter. Borrowings under the facility bear interest at a rate equal to an adjusted LIBOR rate or a base rate determined by reference to the highest of (i) the prime lending rate, (ii) the overnight federal funds rate plus 0.5% or (iii) the one-month adjusted LIBOR rate plus 1.0%, plus an applicable margin of 2.00% for base rate loans and 3.00% for LIBOR loans. There is no scheduled amortization under the facility and the facility matures on November 18, 2016, subject to a one-year extension option. As of June 30, 2015 and December 31, 2014, ESH REIT had no letters of credit outstanding under this facility, an outstanding balance drawn of $0 and borrowing capacity available of $250.0 million. ESH REIT’s obligations under the ESH REIT Revolving Credit Facility are guaranteed by its existing and future and indirect domestic subsidiaries, with certain exceptions, including certain entities that may not provide guarantees pursuant to the 2012 Mortgage Loan. The ESH REIT Revolving Credit Facility is secured by a first-priority security interest in substantially all of the assets of ESH REIT and the guarantors under the facility, with certain exceptions, including certain entities that may not be pledged pursuant to the 2012 Mortgage Loan. In order to avoid a Trigger Event or an Adjusted Trigger Event, the ESH REIT Revolving Credit Facility requires a Debt Yield and an Adjusted Debt Yield, each as defined, of at least 11.5%, and, to avoid an Event of Default, a Consolidated Leverage Ratio, as defined, of no more than 9.25 to 1.0 (with the requirement decreasing to no more than 9.0 to 1.0 over the remaining life of the facility) and a Debt Yield or Adjusted Debt Yield of at least 9.0%. The occurrence of a Trigger Event or an Adjusted Trigger Event requires ESH REIT to repay the outstanding facility balance and restricts its ability to draw additional proceeds. As of June 30, 2015, none of these events had occurred. ESH REIT Mezzanine Loans On November 30, 2012, ESH REIT entered into three mezzanine loans totaling $1.08 billion (the “2012 Mezzanine Loans”). The 2012 Mezzanine Loans would have matured on December 1, 2019, with all outstanding principal and unpaid interest due on that date; however, during 2013, ESH REIT repaid $715.0 million of the 2012 Mezzanine Loans and on June 23, 2014, using principally all of the net proceeds from its 2014 Term Loan, ESH REIT repaid the remaining outstanding balance of $365.0 million of the 2012 Mezzanine Loans, which had a weighted-average interest rate of 9.4%. Future Maturities of Debt Years Ending December 31, Remainder of 2015 $ 29,272 (1) 2016 — 2017 168,000 2018 — 2019 2,184,970 (2) Thereafter 500,000 Total $ 2,882,242 (1) ESH REIT has the option to extend the maturity date of Component A of the 2012 Mortgage Loan for two consecutive one-year periods, subject to limited conditions. (2) The 2014 Term Loan is presented net of an unaccreted discount of approximately $1.5 million. Subject to certain exceptions, mandatory prepayments are required up to 50% of Excess Cash Flow based on ESH REIT’s Consolidated Leverage Ratio, each as defined. ESH REIT made a mandatory prepayment of approximately $8.5 million during the three months ended March 31, 2015. An additional mandatory prepayment may be required during the three months ending March 31, 2016 based on the calculation of the Excess Cash Flow for the year ending December 31, 2015. Fair Value of Debt |