Hospitality Properties Trust (HPT - Free Report) amended and restated its credit agreement that extends its existing $1-billion unsecured revolving credit facility. Further, Hospitality Properties amended its $400-million unsecured term loan. The move is encouraging down the line for the company’s operational efficiency as it enhances the financial flexibility of the REIT.
Importantly, the previous credit facility, which was set to expire on Jul 15, 2018, is now slated to mature in four years on Jul 15, 2022, unless one of the two six-month extension options is exercised to further extend the loan. In addition, the interest rate on the borrowings would be at an annual rate of LIBOR plus 100 basis points (bps), conditioned upon the company’s credit ratings compared with a rate of LIBOR plus 110 bps under its earlier facility. However, the annual facility fee of 20 bps, which is subject to the company’s credit ratings, has remained unchanged.
During the three months, ending Jun 30, 2018, Hospitality Properties will be recognizing a loss on early extinguishment of debt and will write off the unamortized-debt issuance costs, totaling $748,000.
Additionally, the company extended its $400-million term loan, which was due on Apr 15, 2019. It carried an annual interest rate on drawings of LIBOR plus 120 bps. Now the loan is slated to mature on Jul 15, 2023, carrying an annual interest rate of LIBOR plus 110 bps, which is conditioned upon the company’s credit ratings.
Lastly, under the revised agreement, the company can increase its borrowings and commitments to up to $2.3 billion on a combined basis.
The refinancing is a strategic fit for Hospitality Properties as it has reduced interest expenses and extended maturities of loans, which is likely to help the company meet its financial obligations efficiently.
The company currently carries a Zacks Rank #3 (Hold). In the past year, the company’s shares have gained 4% while its industry registered growth of 2.7%.
Stocks Worth a Look
A few better-ranked stocks from the REIT space include Arbor Realty Trust (ABR - Free Report) , Chatham Lodging Trust (CLDT - Free Report) and Host Hotels & Resorts, Inc. (HST - Free Report) . All three stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Arbor Realty Trust’s Zacks Consensus Estimate for 2018 FFO per share rose 14.4% to $1.03 over the past month. Its shares have returned 16.6% over the past three months.
Chatham Lodging’s FFO per share estimates for the current year inched up 1% to $1.93 in a month’s time. Its shares have gained 12.1% over the past 12 months.
Host Hotels & Resorts’ FFO per share estimates for 2018 witnessed rise of 3% and moved to $1.71 over the past month. The stock has gained 7.1% during the past three months.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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