DEBT | DEBT Summary - The Company’s outstanding debt, net of unamortized debt discounts and unamortized deferred financing costs, as of September 30, 2019 and December 31, 2018 , consists of the following (dollars in thousands): Stated Carrying Amount Unamortized Deferred Financing Costs Loan September 30, 2019 December 31, 2018 September 30, 2019 December 31, 2018 Stated Interest Rate Maturity Date Term loan facility ESH REIT Term Facility $ 630,909 $ 628,880 (1) $ 1,132,259 (1) $ 9,357 $ 10,546 LIBOR (2) + 2.00% 9/18/2026 (3) Senior notes 2027 Notes 750,000 750,000 — 14,054 — 4.63% 10/1/2027 2025 Notes 1,300,000 1,292,658 (4) 1,291,671 (4) 15,760 17,877 5.25% 5/1/2025 Revolving credit facilities ESH REIT Revolving Credit Facility 350,000 — — 2,709 (5) 1,469 (5) LIBOR (2) + 2.00% 9/18/2024 Corporation Revolving Credit Facility 50,000 — — 551 (5) 292 (5) LIBOR (2) + 2.25% 9/18/2024 Unsecured Intercompany Facility Unsecured Intercompany Facility (6) 75,000 — — — — 5.00% 9/18/2026 Total $ 2,671,538 $ 2,423,930 $ 42,431 $ 30,184 _________________________________ (1) The ESH REIT Term Facility (defined below) is presented net of an unamortized debt discount of $2.0 million and $4.3 million as of September 30, 2019 and December 31, 2018 , respectively. (2) As of September 30, 2019 and December 31, 2018 , one-month LIBOR was 2.02% and 2.50% , respectively. As of September 30, 2019 and December 31, 2018 , $250.0 million and $300.0 million , respectively, of the ESH REIT Term Facility was subject to an interest rate swap at a fixed rate of 1.175% . (3) Amortizes in equal quarterly installments of $1.6 million . In addition to scheduled amortization, subject to certain exceptions, annual mandatory prepayments of up to 50% of Excess Cash Flow, as defined, may be required. Annual mandatory prepayments for the year are due during the first quarter of the following year. No mandatory prepayments were required in the first quarter of 2019 based on ESH REIT’s Excess Cash Flow for the year ended December 31, 2018. (4) The 2025 Notes (defined below) are presented net of an unamortized discount of $7.3 million and $8.3 million as of September 30, 2019 and December 31, 2018 , respectively. (5) Unamortized deferred financing costs related to revolving credit facilities are included in other assets in the accompanying condensed consolidated balance sheets. (6) Any outstanding debt balances and interest expense, as applicable, owed from ESH REIT to the Corporation eliminate in consolidation. ESH REIT Credit Facilities ESH REIT’s credit agreement, as may be amended and supplemented from time to time, provides for senior secured credit facilities (collectively, the “ESH REIT Credit Facilities”), which, as of September 30, 2019, consisted of a $630.9 million senior secured term loan facility (the “ESH REIT Term Facility”) and a $350.0 million senior secured revolving credit facility (the “ESH REIT Revolving Credit Facility”). Subject to the satisfaction of certain criteria, borrowings under the ESH REIT Credit Facilities may be increased by an amount of up to $600.0 million , plus additional amounts, so long as, after giving effect to the incurrence of such incremental facility and the application of proceeds thereof, ESH REIT’s pro-forma senior loan-to-value ratio is less than or equal to 45% . In September 2019, ESH REIT entered into an amendment to the ESH REIT Credit Facilities whereby, among other things, proceeds from the issuance of the 2027 Notes (defined below) were used to repay $500.0 million of the outstanding borrowings under the ESH REIT Term Facility and the stated amount of the ESH REIT Term Facility was reduced from $1,130.0 million to $630.9 million . Additionally, the amendment reduced the interest rate applicable to the ESH REIT Revolving Credit Facility and extended the maturity of both the ESH REIT Term Facility and the ESH REIT Revolving Credit Facility. In connection with these transactions, ESH REIT incurred $6.7 million of debt extinguishment and modification costs, which consist of the write-off of unamortized deferred financing costs and discounts of $5.6 million and other costs of $1.1 million . Debt extinguishment and modification costs are included as a component of net interest expense in the accompanying condensed consolidated statements of operations. ESH REIT Term Facility — The ESH REIT Term Facility bears interest at a rate equal to (i) LIBOR plus 1.75% for any period during which ESH REIT maintains a public corporate family rating better than or equal to BB- (with a stable or better outlook) from S&P and Ba3 (with a stable or better outlook) from Moody’s (a “Level 1 Period”) or LIBOR plus 2.00% for any period other than a Level 1 Period; or (ii) a base rate, as defined, plus 0.75% during a Level 1 Period or 1.00% for any period other than a Level 1 Period. The ESH REIT Term Facility amortizes in equal quarterly installments of $1.6 million . In addition to scheduled amortization, subject to certain exceptions, annual mandatory prepayments of up to 50% of Excess Cash Flow, as defined, may be required. The ESH REIT Term Facility matures on September 18, 2026. ESH REIT has the option to voluntarily prepay outstanding loans under the ESH REIT Term Facility at any time upon prior written notice. In addition to customary breakage costs, amounts refinanced, substituted or replaced by indebtedness in connection with certain repricing transactions which have a lower all-in yield than the all-in yield under the ESH REIT Term Facility on or prior to March 18, 2020 (other than as a result of a transformative transaction) are subject to a prepayment penalty equal to 1.00% of the aggregate principal amount refinanced, substituted or replaced. Prepayments made after March 18, 2020 are not subject to a prepayment penalty. ESH REIT Revolving Credit Facility — Borrowings under the ESH REIT Revolving Credit Facility bear interest at a rate equal to (i) LIBOR plus a spread that ranges from 1.50% to 2.00% based on ESH REIT’s Consolidated Total Net Leverage Ratio, as defined, or (ii) a base rate (determined by reference to the highest of (A) the prime lending rate, (B) the overnight federal funds rate plus 0.50% , or (C) the one-month adjusted LIBOR rate plus 1.00% ) plus a spread that ranges from 0.50% to 1.00% based on ESH REIT’s Consolidated Total Net Leverage Ratio, as defined. ESH REIT incurs a fee of 0.30% or 0.175% on the unutilized revolver balance. ESH REIT is also required to pay customary letter of credit fees and agency fees. The ESH REIT Revolving Credit Facility provides for the issuance of up to $50.0 million of letters of credit. As of September 30, 2019 , ESH REIT had no letters of credit outstanding under the facility and available borrowing capacity of $350.0 million . The ESH REIT Revolving Credit Facility matures on September 18, 2024. ESH REIT 2027 Notes In September 2019, ESH REIT issued $750.0 million of its 4.625% senior notes due in 2027 (the “2027 Notes”) under an indenture with Deutsche Bank Trust Company Americas, as trustee, at a price equal to 100% of par value in a private placement pursuant to Rule 144A of the Securities Act of 1933, as amended. Proceeds received from the issuance of the 2027 Notes, net of financing costs, totaled $738.0 million , $500.0 million of which were used to repay a portion of outstanding borrowings under the ESH REIT Term Loan. The remaining proceeds, $238.0 million , are expected to be used for general corporate purposes. The 2027 Notes bear interest at a fixed rate of 4.625% per annum, payable semi-annually in arrears on April 1 and October 1 of each year, commencing April 1, 2020, and mature on October 1, 2027. The 2027 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 ESH REIT Credit Facilities. The 2027 Notes are not guaranteed by the Corporation or any of its subsidiaries that lease ESH REIT’s properties or its subsidiaries that engage in franchising or management activities or own intellectual property. The 2027 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 2027 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 2027 Notes at any time on or after October 1, 2022, in whole or in part, at a redemption price equal to 102.313% of the principal amount, declining annually to 100% of the principal amount from October 1, 2024 and thereafter, plus accrued and unpaid interest. Prior to October 1, 2022, ESH REIT may redeem the 2027 Notes, in whole or in part, at a redemption price equal to 100% of the principal amount, plus a “make-whole” premium, as defined, plus accrued and unpaid interest. Prior to October 1, 2022, subject to certain conditions, ESH REIT may redeem up to 35% of the aggregate principal amount of the 2027 Notes at a redemption price equal to 101% of the aggregate principal amount, 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 2027 Notes have the right to require ESH REIT to redeem the 2027 Notes at 101% of the principal amount, plus accrued and unpaid interest. ESH REIT 2025 Notes In May 2015 and March 2016, ESH REIT issued $500.0 million and $800.0 million , respectively, of its 5.25% senior notes due in 2025 (the “2025 Notes”) under an indenture with Deutsche Bank Trust Company Americas, as trustee, in private placements pursuant to Rule 144A of the Securities Act of 1933, as amended. The 2025 Notes 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, and mature on May 1, 2025. 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, plus accrued and unpaid interest. 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. Corporation Revolving Credit Facility The Corporation’s revolving credit facility, as may be amended and supplemented from time to time (the “Corporation Revolving Credit Facility”), provides for the issuance of up to $50.0 million of letters of credit as well as borrowing on same day notice, referred to as swingline loans, in an amount of up to $20.0 million . In September 2019, the Corporation entered into an amendment to the Corporation Revolving Credit Facility which, among other things, extended the facility’s maturity and reduced the interest rate spread on utilized and unutilized revolver balances. Borrowings under the Corporation Revolving Credit Facility bear interest at a rate equal to (i) LIBOR plus 2.25% or (ii) a base rate (determined by reference to the highest of (A) the prime lending rate, (B) the overnight federal funds rate plus 0.50% or (C) the one-month adjusted LIBOR plus 1.00% ) plus 1.25% . As of September 30, 2019 , the Corporation had one letter of credit outstanding under the facility of $0.2 million and available borrowing capacity of $49.8 million . The Corporation Revolving Credit Facility matures on September 18, 2024. Unsecured Intercompany Facility In August 2016, ESH REIT, as borrower, and the Corporation, as lender, entered into an unsecured intercompany credit facility, as may be amended and supplemented from time to time (the “Unsecured Intercompany Facility”). In September 2019, the Unsecured Intercompany Facility was amended to, among other things, extend the facility’s maturity. Under the Unsecured Intercompany Facility, ESH REIT may borrow up to $300.0 million , plus additional amounts, in each case subject to certain conditions. Loans under the Unsecured Intercompany Facility bear interest at an annual rate of 5.0% . ESH REIT has the option to prepay outstanding balances under the facility without penalty. As of September 30, 2019 and December 31, 2018 , the amount outstanding under the facility was $0 . There is no scheduled amortization, and the Unsecured Intercompany Facility matures on September 18, 2026. Covenants The ESH REIT Credit Facilities, the 2027 Notes, the 2025 Notes, the Corporation Revolving Credit Facility and the Unsecured Intercompany Facility contain a number of restrictive covenants that, among other things and subject to certain exceptions, limit the Corporation’s or ESH REIT’s ability and the ability of their respective subsidiaries to engage in certain transactions. In addition, the ESH REIT Revolving Credit Facility and the Corporation Revolving Credit Facility contain financial covenants that, subject to certain conditions, require compliance with certain senior loan-to-value and consolidated leverage ratios. The agreements governing the Corporation’s and ESH REIT’s indebtedness also contain certain customary events of default, including, but not limited to, cross-defaults to certain other indebtedness and, in the case of the ESH REIT Credit Facilities and the Unsecured Intercompany Facility, certain material operating leases and management agreements. As of September 30, 2019 , the Corporation and ESH REIT were in compliance with all covenants under their respective debt agreements. Interest Expense, net —The components of net interest expense during the three and nine months ended September 30, 2019 and 2018 , are as follows (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2019 2018 2019 2018 Contractual interest (1) $ 28,727 $ 29,120 $ 86,209 $ 87,158 Amortization of deferred financing costs and debt discount 2,014 1,996 6,007 6,008 Debt extinguishment and other costs (2) 7,117 231 7,923 2,428 Interest income (1,323 ) (340 ) (4,234 ) (522 ) Total $ 36,535 $ 31,007 $ 95,905 $ 95,072 ______________________ (1) Includes dividends on shares of mandatorily redeemable Corporation preferred stock. Net of capitalized interest of $0.6 million , $0.1 million , $1.4 million and $0.2 million , respectively. (2) Includes interest expense on finance leases (see Note 12 ) and unused credit facility fees. Mandatorily Redeemable Preferred Stock —The Corporation has authorized 350.0 million shares of preferred stock, $0.01 par value, of which 7,130 shares of mandatorily redeemable voting preferred stock were issued and outstanding as of September 30, 2019 and December 31, 2018. Dividends on these mandatorily redeemable voting preferred shares are payable quarterly in arrears at a rate of 8.0% per year. With respect to dividend, distribution and liquidation rights, the 8.0% voting preferred stock ranks senior to the Corporation’s common stock. Holders of the 8.0% voting preferred stock have the right to require the Corporation to redeem in cash the 8.0% voting preferred stock at $1,000 per share plus any accumulated unpaid dividends. On November 15, 2020, the Corporation shall mandatorily redeem all of the 8.0% voting preferred stock at $1,000 per share plus any accumulated unpaid dividends. Fair Value of Debt and Mandatorily Redeemable Preferred Stock —As of September 30, 2019 and December 31, 2018 , the estimated fair value of the Company’s debt was $2.7 billion and $2.3 billion , respectively, and the estimated fair value of the Corporation’s 8.0% mandatorily redeemable preferred stock was $7.1 million and $7.0 million , respectively. Estimated fair values are determined by comparing current borrowing rates and risk spreads offered in the market (Level 2 fair value measures) or quoted market prices (Level 1 fair value measures), when available, to the stated interest rates and spreads on the Company’s debt and the Corporation’s 8.0% |