Ashford Hospitality Trust Inc. (AHT), a lodging real estate investment trust (REIT) in the U.S., has recently obtained a new senior credit facility to replace its existing credit line that was scheduled to mature in April 2012. The investment banking division of KeyCorp (KEY) acted as the lead arranger for the transaction.
The new three-year revolving credit facility worth $105 million bears an interest at 275 to 350 basis points over LIBOR, which is identical to that of the erstwhile line of credit. The credit facility has an accordion feature that would enable Ashford to increase the borrowing capacity to $150 million. In addition, the company could also extend the maturity of the credit facility by an additional year subject to the fulfillment of certain conditions.
The new credit line provides greater financial flexibility to Ashford to address any upcoming debt maturities as well as utilize the cash for other corporate purposes such as opportunistic purchases and other hotel-related investments. By the end of second quarter 2011, the company had a staggering debt burden of approximately $2.4 billion, primarily due to its acquisition binge.
Ashford has continually focused on acquiring upper-upscale and luxury hotels in diversified markets throughout the U.S. The company seeks to own assets in some of the premium markets of the country at discounted prices as property prices have nose-dived in the last couple of years.
Ashford also has a well-experienced management team that brings to the board a unique perspective to hotel investment sourcing, underwriting, asset managing, selling, and financing. The company’s proactive asset management strategy further provides the flexibility to adapt to the changing market conditions to maximize operating margins and enhance customer experience.
We currently have a Neutral rating on Ashford, which presently has a Zacks #3 Rank that translates into a short-term Hold recommendation.
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