Host Hotels & Resorts Inc. (HST) disclosed the amendment and extension of its revolving credit facility worth $1 billion and $500 million term loan. The move will enable this lodging real estate investment trust (REIT) to reduce borrowing costs and extend its debt maturities. However, the shares of Host Hotels dipped 0.41% in yesterday’s trading session on broader market concerns.
With this move, the maturity date of both the credit facility and the term loan was extended to 2019, which was previously scheduled to mature in 2015 and 2017, respectively. Also, based on Host Hotels’ current credit rating, the all-in pricing for both credit facility and term loan was correspondingly reduced to 30 basis points and 32.5 basis points. As of Jul 1, 2014, the company had around $500 million outstanding under the term loan and $220 million under the credit facility.
Notably, a group of leading financial giants – such as J.P. Morgan Securities of JPMorgan Chase & Co. (JPM), Wells Fargo Securities LLC of Wells Fargo & Company (WFC) and Merrill Lynch, Pierce, Fenner & Smith Incorporated of Bank of America Corporation (BAC) – assisted Host Hotels as joint lead arrangers and joint book runners in the transaction.
For Host Hotels, whose liquidity amounted to $392 million as of Mar 31, 2014, the aforementioned moves would help in strengthening its financial flexibility and lower the cost of capital. This will also position the company well for its portfolio restructuring activity.
Host Hotels is scheduled to report second-quarter 2014 results on Jul 31, before the opening bell. The Zacks Consensus Estimate for funds from operations (FFO) for the quarter is currently pegged at 43 cents per share.
Host Hotels currently carries a Zacks Rank #2 (Buy).
Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.
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