Sunstone Hotel Investors, Inc., the owner of Long-Term Relevant Real Estate® in the hospitality sector, announced today that it has completed a series of balance sheet enhancing transactions that include: extending the waiver period of the financial covenant tests on the Company’s $500 million undrawn revolving credit facility, $185 million of funded term loan facilities and $205 million of outstanding private placement senior notes (“Unsecured Debt Facilities”); addressing its remaining near-term maturities; providing resolution with the special servicer on the mortgage loan secured by the Hilton Times Square; and, reducing the Company’s monthly cash burn.
John Arabia, President and CEO, stated, “We are pleased to announce the second amendment of our unsecured debt agreements, extending the covenant relief period through the first quarter 2022, which will offer increased flexibility and provide the Company with the necessary near-term covenant relief and the ability to invest in acquisition opportunities that arise. We appreciate the overwhelming support from our long-standing lender and noteholder relationships, especially given the challenging environment. Additionally, we were able to further strengthen our balance sheet and address our remaining near-term maturities by reaching a resolution with the lender on the Hilton Times Square and arranging for the repayment of the mortgage secured by the Renaissance Washington DC, which we expect to have finalized by the end of the year.”
Credit Facility, Term Loan and Senior Unsecured Notes Covenant Waiver Extension
The Company has successfully completed second amendments to the agreements governing its in-place Unsecured Debt Facilities. The amended Unsecured Debt Facilities extend the covenant waiver period from June 30, 2021 to March 31, 2022. Additionally, the amendments extend the modification of the required quarterly-tested financial covenants to ease compliance for four quarters following the end of the covenant waiver period. The Company will be required to maintain certain minimum liquidity thresholds until it is able to satisfy its pre-amendment financial covenants. As part of the second amendments, the Company has been granted the ability to apply the net proceeds received from the previously completed sale of the Renaissance Los Angeles Airport to repay the mortgage loan secured by the Renaissance Washington DC. The repayment of the loan will eliminate approximately $9.7 million of annual debt service and will leave the Company with only three mortgages remaining. Upon the early repayment of the loan, the Renaissance Washington DC will be added as a guarantor of the Unsecured Debt Facilities. All other financial covenants remain substantively the same as the prior amendment. The Company does not have any amounts drawn on its $500 million revolving credit facility.
Hilton Times Square Resolution
The Company has successfully executed an agreement with the holder of the mortgage loan secured by the Hilton Times Square. In exchange for a $20 million payment, the credit of approximately $3 million of restricted cash held by the noteholder, the assignment of the Company’s interest in the hotel, and the retention of certain potential employee related obligations, the Company has satisfied all outstanding debt obligations, including regular and default interest or late charges that may be assessed. Additionally, the Company expects to write off approximately $22 million of various accrued expenses related to the leasehold interest in the property, including, but not limited to, accrued taxes, payments in lieu of taxes, accrued ground rent, and accrued easement payments. The Company expects to remove the net assets and liabilities related to the hotel from its balance sheet for the period ended December 31, 2020, but may retain certain contingent liabilities until those items have been resolved.
