Park Hotels& Resorts Inc. (NASDAQ:PK) Files An 8-K Entry into a Material Definitive Agreement
Item1.01
| Entry into a Material Definitive Agreement. |
On December28, 2016, Park Hotels Resorts Inc. (the Company) and
its wholly owned subsidiary, Park Intermediate Holdings LLC (the
Borrower) entered into the Credit Agreement (the Credit
Agreement), dated as of December28, 2016 (the Closing Date), with
Wells Fargo Bank, National Association, as administrative agent,
the financial institutions party thereto as lenders (the
Lenders), Bank of America, N.A. and JPMorgan Chase Bank, N.A., as
syndication agents, Barclays Bank PLC, Deutsche Bank Securities
Inc., Goldman Sachs Bank USA and Morgan Stanley Senior Funding,
Inc., as documentation agents, and The Bank of New York Mellon,
Citibank, N.A., PNC Bank, National Association and Royal Bank of
Canada, as senior managing agents. The Credit Agreement provides
for senior unsecured credit facilities (the Credit Facilities)
consisting of:
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a revolving credit facility in an aggregate principal amount of up to $1.0billion (the Revolving Facility), which will mature December24, 2020, with two six-month extension options; and |
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a $750.0million term loan facility (the Term Loan Facility), which will mature December24, 2021. |
The Revolving Facility includes a tranche available in (i)United
States Dollars only in an aggregate principal amount of up to
$750.0million and (ii)United States Dollars and certain foreign
currencies in an aggregate principal amount of up to
$250.0million. Such multicurrency Revolving Tranche also includes
a subfacility for the issuance of letters of credit in an
aggregate amount of up to $50.0million. The Credit Agreement
includes the option to increase the size of the Revolving
Facility and enter into additional incremental term loan credit
facilities, subject to certain limitations, in an aggregate
commitment or principal amount not to exceed $500.0million for
all such increases.The Term Loan Facility was advanced in full on
the Closing Date, with proceeds applied to repay certain existing
indebtedness of the Company and its subsidiaries, to pay fees and
expenses incurred in connection with entering into the Credit
Agreement and for other general corporate purposes. Borrowings
are not permitted under Revolving Facility until the consummation
of the Companys spin-off from Hilton Worldwide Holdings Inc. (the
Revolving Facility Effective Date). In the event the Revolving
Facility Effective Date does not occur within 135 days of the
Closing Date, the Term Loan Facility will immediately become due
and payable and all commitments under the Revolving Facility will
be terminated.
Interest Rate and Fees
Borrowings under the Credit Agreement will bear interest, at the
Borrowers option, at a rate equal to a margin over either (a)a
base rate determined by reference to the highest of (1)the
administrative agents prime lending rate, (2)the federal funds
effective rate plus 0.50% and (3)the LIBOR rate that would be
payable on such day for a LIBOR-rate loan with a one-month
interest period plus 1.00% or (b)the LIBOR rate for the interest
period relevant to such borrowing. The margin for the Revolving
Facility is based on the ratio of total indebtedness to EBITDA
(the Leverage Ratio) of the Company and ranges from 0.50% to
2.00%, in the case of base rate loans, and 1.50% to 3.00%, in the
case of LIBOR-rate loans. The margin for the Term Loan Facility
is 0.05% lower than the applicable Revolving Facility margin at
each Leverage Ratio level. In addition, upon receiving an
investment grade rating, the Borrower may elect to convert from
having the pricing level determined according to the Leverage
Ratio to having the pricing level determined according to the
credit rating of the Borrower.
The Borrower is also required to pay an unused commitment fee to
the Lenders under the Revolving Facility in respect of the
unutilized commitments thereunder at a rate of either 0.20% or
0.30%per annum, depending on the level of usage. Upon converting
to a credit rating-based pricing grid, the unused facility fee
will no longer apply and the Borrower will instead be required to
pay a facility fee ranging from 0.125% to 0.300% on the aggregate
amount of the Revolving Facility, determined according to the
credit rating of the Borrower. During the initial period prior to
the Revolving Facility Effective Date, the Borrower will be
required to pay duration fees to the Lenders under the Term Loan
Facility equal to (x) 0.05% of the principal amount outstanding
under the Term Loan Facility if the Revolving Facility Effective
Date does not occur within 45 days of the Closing Date and (y)
0.10% of such principal amount if the Revolving Facility
Effective Date does not occur within 90 days of the Closing Date.
An extension fee of 0.075% of the aggregate amount of the
Revolving Facility is payable in connection with the exercise of
each of the two extension options available under the Revolving
Facility.
Prepayments
The Borrower is permitted to voluntarily repay amounts
outstanding under the Term Loan Facility and the Revolving
Facility at any time without premium or penalty, subject to the
payment of customary breakage costs in the case of a prepayment
of LIBOR loans.
Amortization
The Credit Facilities have no required amortization payments
prior to the final maturity date.
Guarantees and Collateral
As of the Closing Date, there are no guarantors of, or collateral
required to support, the Credit Facilities. If any subsidiary of
the Borrower becomes a borrower or a guarantor of any unsecured
indebtedness it will be required to become a guarantor of the
obligations under the Credit Agreement. In addition, if the
Leverage Ratio exceeds 6.50 to 1.00 as of the end of any two
consecutive fiscal quarter periods, subject to exceptions for
most foreign subsidiaries and certain other exceptions, (1)each
wholly owned subsidiary of the Borrower that either owns,
directly or indirectly, unencumbered real estate assets or other
assets that have a fair market value in excess of $5.0million
will be required to become a guarantor and (2)all of the equity
interests of such guarantors will be required to be pledged to
secure the obligations under the Credit Facilities. Any such
guarantees and equity interest pledges provided as a result of
the Leverage Ratio exceeding 6.50 to 1.00 may subsequently be
released if the Leverage Ratio thereafter falls to 6.50 to 1.00
or less as of the end of any two consecutive fiscal quarter
periods.
Certain Covenants and Events of Default
The Credit Agreement contains certain customary affirmative and
negative covenants. Subject to certain exceptions, such covenants
restrict the ability of the Borrower, the Company, and their
respective subsidiaries to, among other things, incur liens on
properties included in the calculation of the Borrowers
unencumbered pool value, pay dividends and distributions, or
consummate mergers, affiliate transactions and asset sales. In
addition, the Credit Agreement requires that the Company
(measured on a consolidated basis) satisfy certain financial
maintenance covenants, including:
| Leverage Ratio of not more than 7.25 to 1.00; |
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ratio of reserve adjusted EBITDA to fixed charges of not less than 1.50 to 1.00; |
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ratio of secured indebtedness to total asset value of not more than 0.45 to 1.00; |
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ratio of unsecured indebtedness to the unencumbered asset value of properties satisfying certain criteria specified in the Credit Agreement of not more than 0.60 to 1.00 (subject to options to increase the ratio to 0.65 to 1.00 for a fiscal quarter and the next succeeding fiscal quarter, provided such options cannot be exercised more than three times during the term of the Credit Agreement or for consecutive periods); |
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ratio of adjusted net operating income from unencumbered properties satisfying certain criteria specified in the Credit Agreement to interest expense on unsecured indebtedness of not less than 2.00 to 1.00; and |
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prior to the Revolving Facility Effective Date, a minimum EBITDA from unencumbered properties satisfying certain criteria specified in the Credit Agreement of not less than $250.0million. |
The Credit Agreement also includes customary events of default,
the occurrence of which, following any applicable grace period,
would permit the Lenders to, among other things, declare the
principal, accrued interest and other obligations owing under the
Credit Agreement to be immediately due and payable.
The foregoing summary of the Credit Agreement is qualified in its
entirety by reference to the Credit Agreement, a copy of which is
attached hereto as Exhibit 10.1 and incorporated herein by
reference.
From time to time, the Parent and the Company has had customary
commercial and/or investment banking relationships with Wells
Fargo Bank, National Association, Bank of America, N.A., JPMorgan
Chase Bank, N.A., Barclays Bank PLC, Deutsche Bank Securities
Inc., Goldman Sachs Bank USA, Morgan Stanley Senior Funding,
Inc., The Bank of New York Mellon, Citibank, N.A., PNC Bank,
National Association and Royal Bank of Canada, and/or certain of
their affiliates.
| Item2.03 |
Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant. |
The information set forth in Item1.01 above is incorporated
herein by reference.
| Item9.01. | Financial Statements and Exhibits. |
(d) Exhibits.
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Exhibit No. |
Description |
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| 10.1 |
Credit Agreement, dated as of December28, 2016, by and among Park Intermediate Holdings LLC, Park Hotels Resorts Inc., the lenders party thereto, Wells Fargo Bank, National Association, as administrative agent, Bank of America, N.A. and JPMorgan Chase Bank, N.A., as syndication agents, Barclays Bank PLC, Deutsche Bank Securities Inc., Goldman Sachs Bank USA and Morgan Stanley Senior Funding, Inc., as documentation agents, and The Bank of New York Mellon, Citibank, N.A., PNC Bank, National Association and Royal Bank of Canada, as senior managing agents. |