UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): December 10, 2020
RLJ LODGING TRUST
(Exact Name of Registrant as Specified in Charter)
| Maryland | | 001-35169 | | 27-4706509 |
(State or Other Jurisdiction of Incorporation) | | (Commission File Number) | | (I.R.S. Employer Identification No.) |
3 Bethesda Metro Center
Suite 1000
Bethesda, MD 20814
(Address of Principal Executive Offices, and Zip Code)
(301) 280-7777
(Registrant’s Telephone Number, Including Area Code)
Not applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| | ¨ | Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| | ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| | ¨ | Pre-commencement communication pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communication pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| Common Shares of beneficial interest, par value $0.01 per share | RLJ | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Item 1.01. Entry into a Material Definitive Agreement.
On December 10, 2020 (the “Effective Date”), RLJ Lodging Trust (the “Company”), as parent guarantor, RLJ Lodging Trust, L.P., the Company’s operating partnership (the “Operating Partnership”), as borrower, and certain subsidiaries of the Company as guarantors (the “Subsidiary Guarantors”) entered into (1) a Second Amendment to Third Amended and Restated Credit Agreement (the “Credit Facility Amendment”) with Wells Fargo Bank, National Association (“Wells Fargo”), as administrative agent, and the other lenders party thereto and (2) a Ninth Amendment to Term Loan Agreement (the “Term Loan Amendment” and, together with the Credit Facility Amendment, the “Amendments”) with Wells Fargo, as administrative agent, and the other lenders party thereto. The Credit Facility Amendment amends that certain Third Amended and Restated Credit Agreement, dated as of December 18, 2019 (the “Credit Agreement”), among the Company, the Operating Partnership, Wells Fargo, as administrative agent, and the lenders from time to time party thereto, which provides for (i) a $600 million unsecured revolving credit facility (the “Revolver”) with a scheduled maturity date of May 18, 2024 (subject to a one year extension option), (ii) a $400 million unsecured term loan (the “Tranche A-1 Term Loan”) with a scheduled maturity date of January 25, 2023, and (iii) a $400 million unsecured term loan (the “Tranche A-2 Term Loan”) with a scheduled maturity date of May 18, 2025. The Term Loan Amendment amends that certain Term Loan Agreement, dated as of November 20, 2012 (as previously amended, the “Term Loan Agreement”), among the Company, the Operating Partnership, Wells Fargo, as administrative agent, and the lenders from time to time party thereto, which provides for an unsecured term loan of $225 million with a scheduled maturity date of January 25, 2023 (the “Five Year Term Loan” and, together with the Tranche A-1 Term Loan and the Tranche A-2 Term Loan, the “Term Loans”).
The Amendments (1) extend by three fiscal quarters the suspension period for the testing of all financial maintenance covenants under the Credit Agreement and the Term Loan Agreement so that no testing will be required through and including the fiscal quarter ending December 31, 2021 (such period, the “Covenant Relief Period”) and (2) for periods following the Covenant Relief Period, extend the period of less restrictive thresholds for the maximum ratio of net debt to EBITDA (the “Leverage Ratio”) and minimum ratio of unencumbered adjusted NOI to unsecured interest expense (the “Unencumbered Debt Service Coverage Ratio”) as follows:
| · | Maximum Leverage Ratio of 8.50 to 1.00 for the first two fiscal quarters following the Covenant Relief Period, 8.00 to 1.00 for the third and fourth fiscal quarters following the Covenant Relief Period, 7.50 to 1.00 for the fifth fiscal quarter following the Covenant Relief Period (such period, the “Leverage Relief Period”), and |
| · | Minimum Unencumbered Debt Service Coverage Ratio of 1.65 to 1.00 for the first three fiscal quarters following the Covenant Relief Period. |
During the period until the date that financial statements are delivered for the fiscal quarter ending March 31, 2022 (such period, the “Restriction Period”), the Amendments also provide for (1) a continuation of the requirement that the net cash proceeds from asset sales, equity issuances and incurrences of indebtedness, subject to various exceptions, be applied as a mandatory prepayment of certain amounts outstanding under the Credit Agreement, the Term Loan Agreement, and certain other pari passu debt (including the 2014 Term Loan discussed under “Item 8.01. Other Events” below) (collectively, the “Pari Passu Debt”), but with certain modifications that, among other things, allow equity and debt issuance proceeds to instead be applied to certain secured debt, (2) a continuation of negative covenants limiting the ability of the Company and its subsidiaries to incur additional indebtedness, make prepayments of other indebtedness, make dividends and distributions (with certain exceptions, including for the payment of a cash dividend of $0.01 per common share, the payment of a cash dividend on the Company’s Series A Cumulative Convertible Preferred Shares and other payments for purposes of maintaining REIT status) and stock repurchases, make capital expenditures, make investments, including acquisitions or mergers, in each case, subject to various exceptions and (3) a continuation of the requirement to pledge a minimum level of the equity interests in subsidiaries of the Company that are Subsidiary Guarantors or otherwise directly or indirectly own unencumbered properties to secure on a pari passu basis the obligations owing in respect of the Pari Passu Debt. The equity pledge requirement will continue following the Restriction Period until such time as the Leverage Ratio is no greater than 6.50 to 1.00 for two consecutive fiscal quarters (the “Covenant Relief Pledged Collateral Period”). The Amendments also (1) extend the mandatory prepayment requirement applicable to dispositions of unencumbered properties through the end of the Covenant Relief Pledged Collateral Period (in lieu of the end of the Restriction Period) and (2) extend the requirement to maintain a minimum liquidity level of $125 million through the end of the Leverage Relief Period (in lieu of the Restriction Period).
The Restriction Period, the Covenant Relief Period, and the Leverage Relief Period, may, at the Operating Partnership’s election, be terminated early if, among other things, the Company is at such time able to comply with the financial covenants that apply immediately after the Covenant Relief Period.
The Amendments further provide that, until such time as the Leverage Ratio is less than or equal to 7.00 to 1.00, borrowings under the Credit Agreement and the Term Loan Agreement will bear interest, at the Operating Partnership’s election, at a per annum rate of (i) in the case of the Revolver, (a) LIBOR plus a margin of 250 basis points or (b) a base rate plus a margin of 150 basis points, and (ii) in the case of each of the Term Loans, (a) LIBOR plus a margin of 240 basis points or (b) a base rate plus a margin of 140 basis points. The floor of 0.25% to the LIBOR interest rate determination under both the Credit Agreement and the Term Loan Agreement remains in-place.
As of the Effective Date, the Company had $400 million outstanding under the Revolver and $400 million outstanding under the Tranche A-1 Term Loan, $400 million outstanding under the Tranche A-2 Term Loan and $225 million outstanding under the Five Year Term Loan.
Except as amended by the relevant Amendment, the terms of the Credit Agreement and the Term Loan Agreement remain in full force and effect. The foregoing summary of the Credit Agreement Amendment and the Term Loan Amendment is qualified in its entirety by reference to the Credit Agreement Amendment and the Term Loan Amendment, copies of which are attached to this Current Report on Form 8-K as Exhibits 10.1 and 10.2, respectively, and incorporated herein by reference.
Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
The disclosure set forth under “Item 1.01. Entry into a Material Definitive Agreement” is incorporated by reference herein.
Item 8.01. Other Events.
On the Effective Date, the Company, as parent guarantor, the Operating Partnership, as borrower and the Subsidiary Guarantors also entered into an Eighth Amendment to Term Loan Agreement (the “2014 Term Loan Amendment”) with Capital One, N.A. (“Capital One”), as administrative agent, and the lenders party thereto. The 2014 Term Loan Amendment amends the Term Loan Agreement, dated as of December 22, 2014 (as previously amended, the “2014 Term Loan Agreement”), among the Company, the Operating Partnership, Capital One, as administrative agent, and the lenders from time to time party thereto, which provides for a $150 million term loan with a scheduled maturity date of January 22, 2022 (the “2014 Term Loan”).
The 2014 Term Loan Amendment provides, among other things, for certain conforming amendments to the affirmative, negative and financial covenants and other provisions contained in the 2014 Term Loan Agreement consistent with the terms and provisions of the Amendments. Amounts owing under the 2014 Term Loan Agreement are guaranteed by the Company and the Subsidiary Guarantors. Consistent with the terms of the Amendments, the 2014 Term Loan is secured by equity pledges on a pari passu basis with the Revolver and the Term Loans during the Covenant Relief Pledged Collateral Period.
| Item 9.01 | Financial Statements and Exhibits |
(d) The following exhibits are filed as part of this Current Report on Form 8-K:
| 10.1* | | Second Amendment to Third Amended and Restated Credit Agreement, dated as of December 10, 2020, by and among RLJ Lodging Trust, L.P., RLJ Lodging Trust, Wells Fargo Bank, National Association, as Administrative Agent and a lender, and the other lenders party thereto |
| 10.2* | | Ninth Amendment to Term Loan Agreement, dated as of December 10, 2020, by and among RLJ Lodging Trust, L.P., RLJ Lodging Trust, certain subsidiaries of RLJ Lodging Trust party thereto, Wells Fargo Bank, National Association, as Administrative Agent and a lender, and the other lenders party thereto |
| 104 | | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* RLJ Lodging Trust has omitted certain schedules and exhibits pursuant to Item 601(a) of Regulation S-K and shall furnish supplementally to the SEC copies of any of the omitted schedules and exhibits upon request by the SEC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| | RLJ LODGING TRUST |
| | |
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| Date: December 14, 2020 | By: | /s/ Frederick D. McKalip |
| | | Frederick D. McKalip Senior Vice President and General Counsel |
