RED LION HOTELS CORPORATION (NYSE:RLH) Files An 8-K Completion of Acquisition or Disposition of Assets
Item 2.01. Completion of Acquisition or Disposition of Assets.
On December 19, 2019, RL Salt Lake LLC, completed the sale of the Hotel RL Salt Lake City (the Hotel) to RL QOZB, LLC a Delaware limited liability company (the Purchaser). The purchase price for the Hotel was $33.0 million, which was paid in cash at closing.
RL Salt Lake LLC is a wholly owned subsidiary of RL Venture, LLC. RL Venture, LLC is a variable interest entity in which Red Lion Hotels Corporation (the Company) holds a 55% interest, and therefore the Company consolidates the assets, liabilities and results of operations of this entity.
After payment of closing costs, and after the repayment of an $11.0 million property level mortgage, the Company expects to receive a distribution of $12.0 million in net proceeds from the sale of the Hotel. The Company expects to use the net proceeds to retire corporate level term debt of $2.4 million, and use the remaining cash for general operating purposes and reduction of the corporate line of credit.
At closing, an affiliate of the Purchaser entered into a franchise agreement with Red Lion Hotels Franchising, Inc., a wholly owned subsidiary of the Company, to continue to operate the hotel under the Hotel RL® brand. The franchise agreement provides for a one year term, renewable on a monthly basis thereafter, and requires the payment of monthly royalty and program fees based upon the Hotels room count. Early termination of the franchise agreement by Red Lion Franchising upon default of the franchisee, or termination of the agreement by the franchisee without cause, will require the franchisee to pay a termination fee.
Item 2.04 Triggering Events That Accelerate or Increase a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement
Under the terms of the Credit Agreement dated May 14, 2018 (as amended) between the Company, Deutsche Bank AG New York Branch, as administrative agent and collateral agent (DB), and the lenders party thereto, $2.4 million of the net proceeds from the sale of the Hotel that are distributed by RL Venture LLC to the Company are required to be maintained by the Company in a cash collateral account controlled by DB, as administrative agent, and may be used by the Company to prepay the outstanding term loan under the Credit Agreement.
Item 7.01. Regulation FD Disclosure.
A copy of the companys press release, dated December 20, 2019 announcing the completion of the sale is furnished as Exhibit 99.1 hereto.