Sunstone Hotel Investors, Inc. (NYSE: SHO) has recently announced the completion of a Third Amended and Restated Credit Agreement, with an aggregate borrowing capacity of $1.35 billion. This move is aimed at addressing near term maturities, extending the duration of remaining loans, and strengthening the company’s balance sheet.
The Amended Credit Agreement consists of a $500 million revolving credit facility with an initial maturity in September 2029, a $275 million delayed-draw term loan facility with an initial maturity in January 2029, a $275 million term loan facility with an initial maturity in January 2030, and a $300 million term loan facility due in January 2031. These loans are freely prepayable at any time.
The facilities will bear interest pursuant to a leverage-based pricing grid ranging from 1.35% to 2.25% over the applicable term SOFR. In connection with the new facilities, the company entered into a series of interest rate swaps to lower its borrowing cost and manage interest rate risk, resulting in over 75% of its debt and preferred equity now subject to fixed rates.
As a result of the incremental borrowing on the new term loans, the company consolidated its prior four term loans into three loans and fully repaid the outstanding balance on its revolving credit facility. Additionally, the company is delaying the draw of up to $90 million under the $275 million delayed-draw term loan facility until January 2026 and expects to use a majority of the proceeds to repay the Series A Senior Notes at their scheduled maturity. Following this repayment, the company will not have any debt maturities until 2028.
Sunstone Hotel Investors’ unsecured credit facilities are led jointly by Wells Fargo Securities, LLC, BofA Securities, Inc., JPMorgan Chase Bank, N.A., PNC Capital Markets LLC, U.S. Bank National Association, Truist Securities, Inc., Regions Capital Markets, and The Huntington National Bank. Wells Fargo Bank, National Association, serves as the Administrative Agent.
These changes in the credit agreement are part of Sunstone Hotel Investors' strategy to create long-term stakeholder value through the acquisition, active ownership, and disposition of well-located hotel and resort real estate. Following these announcements, the company's shares moved 1.9%, and are now trading at a price of $9.64. If you want to know more, read the company's complete 8-K report here.
