Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
Host Hotels & Resorts, Inc. (“Host Inc.”) and Host Hotels & Resorts, L.P. (“Host LP”), for whom Host Inc. acts as sole
general partner, are reporting that on May 31, 2017 Host LP entered into an amendment and restatement (the “Restatement”) of its existing senior unsecured bank credit facility dated as of September 10, 2015 with Bank of America,
N.A., as administrative agent and certain other agents and lenders (the “Existing Credit Agreement”), for the purpose of replacing and refinancing (1) its existing $1,000,000,000 revolving credit facility tranche that was scheduled to
mature in June 2018 (excluding any available extension option) with a new revolving credit facility tranche in the same committed amount (the “Revolver”) and (2) its existing $500,000,000 term loan facility tranche that would have
matured in June 2017 (excluding any available extension option) with a new term loan facility tranche in the same principal amount (the “New Term Facility”). The Restatement does not refinance the existing separate $500,000,000 term loan
facility tranche scheduled to mature in September 2020 (the “2020 Term Facility”), which remains outstanding. The Restatement provides, among other things, for:
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an interest rate on all borrowings based on LIBOR or a base rate plus a margin that varies according to Host LP’s unsecured long-term debt rating, with such rate being (1) in the case of Revolver borrowings,
either LIBOR plus a margin ranging from 82.5 to 155 basis points or a base rate plus a margin ranging from zero to 55 basis points and (2) in the case of the New Term Facility borrowings and 2020 Term Facility borrowings (which remains
unchanged from the Existing Credit Agreement), either LIBOR plus a margin ranging from 90 to 175 basis points or a base rate plus a margin ranging from zero to 75 basis points;
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in the case of the Revolver, a facility fee payable on the total amount of the Revolver commitment at a rate ranging from 12.5 to 30 basis points, with the actual rate determined according to Host LP’s unsecured
long term debt rating;
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a maturity date of (1) in the case of the Revolver, May 31, 2021, which date may be extended by up to a year by the exercise of up to two 6-month extension options, each of which is subject to certain
conditions including the payment of an extension fee and (2) in the case of the New Term Facility, May 31, 2021, which date may be extended up to a year by the exercise of one 1-year extension option, which is subject to certain conditions
including the payment of an extension fee. The maturity date of the 2020 Term Facility under the Existing Credit Agreement remains unchanged, with a scheduled maturity date in September 2020;
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a foreign currency subfacility for Canadian Dollars, Australian Dollars, Euros, British Pounds Sterling and, if available to the lenders, Mexican Pesos of up to the foreign currency equivalent of $500,000,000, subject
to a lower amount in the case of Mexican Pesos borrowings;
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an option for Host LP to add in the future $500,000,000 of commitments which may be used for additional revolving credit facility borrowings and/or term loans, subject to obtaining additional loan commitments and
satisfaction of certain conditions specified in the Restatement;
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a subfacility of up to $100,000,000 for swingline borrowings and a subfacility of up to $100,000,000 for issuances of letters of credit;
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no required scheduled amortization payments prior to the maturity date of the Revolver, the New Term Facility or the 2020 Term Facility, as applicable; and
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financial covenants (including covenants concerning leverage, fixed charge coverage and unsecured interest coverage) that are the same as under the Existing Credit Agreement, including (i) that our fixed charge
coverage ratio may not be less than 1.25:1.00, (ii) our leverage ratio may not exceed 7.25:1.00 and (iii) our unsecured interest coverage ratio may not be less than (x) 1.75:1.00 if our leverage ratio is less than 7.00:1.00 or
(y) 1.50:1.00 if our leverage ratio is greater than 7.00:1.00.
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Borrowings under the Restatement may be used for working capital and
other general corporate purposes, including for the consummation of acquisitions. As of May 31, 2017, Host LP had approximately CAD 106.9 million, EUR 77.2 million, GBP 11.72 million and AUD 50 million (for a total of
approximately U.S. 218 million) outstanding under the Revolver, $500,000,000 outstanding under the New Term Facility and $500,000,000 outstanding under the 2020 Term Facility.
Pledges and Guarantees
In addition, the Restatement
removed the requirement for Host LP, under certain circumstances as provided in the Existing Credit Agreement, to provide subsidiary guarantees and pledges of equity interests if our leverage ratio were to exceed 6:00:1.00.
Other Covenants and Events of Acceleration
The
Restatement imposes restrictions on customary matters that were also restricted in the Existing Credit Agreement. As with the Existing Credit Agreement, certain covenants are less restrictive at any time that our leverage ratio is below 6.00:1.00.
In particular, at any time that our leverage ratio is below 6.00:1.00, the covenants in respect of dividends and other restricted payments are not applicable, and acquisition and investment transactions are generally permitted without limitation so
long as, after giving effect to any such transaction, we are in compliance with the financial covenants under the Restatement.
The Restatement also
includes financial covenant tests applicable to the incurrence of debt that are generally consistent with the limitations applicable under the senior notes indentures for our investment grade senior notes.
The Restatement also includes usual and customary events of default for facilities of this nature, and provides that, upon occurrence and continuation of an
event of default, payment of all amounts payable under the credit facilities may be accelerated, and the lenders’ commitments may be terminated. In addition, upon the occurrence of certain insolvency or bankruptcy related events of default, all
amounts payable under the credit facilities will automatically become due and payable and the lenders’ commitments will automatically terminate.
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The foregoing does not purport to be a complete description of the terms of the Restatement and such description
is qualified in its entirety by reference to the Restatement, a copy of which is filed as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by reference.
Existing Relationships with the Lenders
Host LP has
ongoing relationships with many of the lenders that are parties to the Restatement for which they have received customary fees and expenses. Certain of the lenders provide commercial banking services, including participations in mortgage loans and
the provision of cash management services. Host LP has also entered into interest rate swap agreements and other hedging arrangements with certain lenders. Affiliates of certain of the lenders have also acted as underwriters for issuances of Host
LP’s senior notes, as well as sales agents for issuances of equity securities of Host Inc. The Bank of New York Mellon also acts as trustee for our senior notes.