Item 1.01. Entry into a Material Definitive Agreement.
On May 14, 2021, Park Intermediate Holdings LLC (“PIH”), PK Domestic Property LLC (“PK Domestic LLC”) and PK Finance Co-Issuer Inc. (“Corporate Co-Issuer” and, together with PK Domestic LLC, the “Co-Issuers” and, the Co-Issuers together with PIH, the “Issuers”), direct and indirect subsidiaries of Park Hotels & Resorts Inc. (the “Company”), issued $750 million aggregate principal amount of 4.875% senior secured notes due 2029 (the “Notes”) under an indenture (the “Indenture”), dated as of May 14, 2021, among the Issuers, the Company, the subsidiary guarantors party thereto and U.S. Bank National Association, as trustee and collateral agent (the “Trustee”).
The Notes were sold in the United States only to accredited investors pursuant to an exemption from the Securities Act of 1933, as amended (the “Securities Act”), and subsequently resold to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A under the Securities Act and to non-U.S. persons in accordance with Regulation S under the Securities Act.
In accordance with the terms of its revolving credit facility (the “Revolver”) and term loan facility entered into in 2019 and maturing in August 2024 (the “Term Loan”), the Company intends to use approximately $564 million of the net proceeds from the offering of the Notes to repay amounts outstanding under the Revolver and approximately $173 million to repay a portion of the Term Loan.
The Notes will mature on May 15, 2029. Interest on the Notes will accrue at a rate of 4.875% per annum. Interest on the Notes will be payable semi-annually in cash in arrears on May 15 and November 15 of each year, commencing on November 15, 2021.
The Notes are fully and unconditionally guaranteed, jointly and severally, by the Company, the sole member of PIH, and each existing and future restricted wholly-owned subsidiary of PIH (other than the Co-Issuers) that incurs or guarantees any indebtedness under certain of the Company’s credit facilities, any additional first lien obligations, certain other bank indebtedness or any other material capital markets indebtedness (each, a “subsidiary guarantor” and together with the Company, the “guarantors”). The notes are secured, subject to certain permitted liens, by a first priority security interest in all of the capital stock (the “Collateral”) of certain specified wholly-owned subsidiaries of certain of the guarantors and PK Domestic LLC, which Collateral also secures the obligations under certain of the Company’s credit facilities and the Issuers’ existing senior secured notes on a first priority basis.
The Issuers may redeem the Notes at any time prior to May 15, 2024, in whole or in part, at a redemption price equal to 100% of the accrued principal amount thereof plus unpaid interest, if any, to the redemption date plus a make-whole premium. The Issuers may redeem the Notes, in whole or in part, at any time on or after May 15, 2024 at the redemption price of (i) 102.438% of the principal amount should such redemption occur before May 15, 2025, (ii) 101.219% of the principal amount should such redemption occur before May 15, 2026, and (iii) 100.000% of the principal amount should such redemption occur on or after May 15, 2026, in each case plus accrued and unpaid interest, if any, to, but excluding, the redemption date.
In addition, at any time prior to May 15, 2024 the Issuers may redeem up to 40% of the Notes with the net cash proceeds from certain equity offerings at a redemption price of 104.875% of the principal amount redeemed plus accrued and unpaid interest, if any, to, but excluding, the redemption date. However, the Issuers may only make such redemptions if at least 60% of the aggregate principal amount of the Notes issued under the Indenture remains outstanding after the occurrence of such redemption.
The Indenture contains customary covenants that will limit the Issuers’ ability and, in certain instances, the ability of the Issuers’ subsidiaries, to borrow money, create liens on assets, make distributions and pay dividends on or redeem or repurchase stock, make certain types of investments, sell stock in certain subsidiaries, enter into agreements that restrict dividends or other payments from subsidiaries, enter into transactions with affiliates, issue guarantees of indebtedness, and sell assets or merge with other companies. These limitations are subject to a number of important exceptions and qualifications set forth in the Indenture. In addition, the Indenture will require PIH to maintain total unencumbered assets as of each fiscal quarter of at least 150% of total unsecured indebtedness, in each case calculated on a consolidated basis.