FelCor Casts $200M Safety Net With Debt Facility

IRVING, TX-FelCor Lodging Trust has bundled 13 hotels with a combined 3,400 rooms to secure a $200-million debt facility from JPMorgan Chase, weaving a safety net for $175 million of senior notes that mature in October 2004 and its ongoing capital expenditures program.

JPMorgan Chase built in a delayed draw of 18 months, with a six-month option to extend, at a floating rate of LIBOR plus 2.25% to 2.75% depending upon the loan-to-value ratio of the facility. The Irving, TX-based REIT’s collateral, all free and clear of debt, consists of Embassy Suites Hotels, Holiday Inn, Doubletree Guest Suites and Crowne Plaza brands, says Andrew J. Welch, FelCor’s senior vice president and treasurer. All that’s being said for now about the locations is that they are diversified markets, with some in Florida, Georgia and California.

Welch stresses to GlobeSt.com that the JPMorgan Chase facility is just one of several strategies at play to get ready for the senior notes’ due date. FelCor is building liquidity from the sale of 33 hotels, the usual positive cash flow from the operation, a $50-million unsecured credit line that could stretch as far $200 million and $155 million of cash on hand. “The combination of all these will provide FelCor with working capital to pay on our capital expenditures program and debt maturities,” Welch says. To date, two of 33 targeted hotels have been sold.

Welch says FelCor is ensuring it has financial flexibility and “adequate liquidity in this environment regardless of what happens in the economy.” Draws against the facility will be converted into 10-year, fixed-rate commercial mortgage-backed securities through JPMorgan Chase. The loans will be assumable, subject to certain conditions, and bear a market rate.

By reworking the financing pool, FelCor will have access to capital at a significantly lower cost than is currently available with its unsecured credit line, which is resting at a zero balance, according to a press release. The unsecured line carries a rate of LIBOR plus 3.87% interest.

“In this current environment,” Welch says, “we wanted to maintain and improve our financial flexibility.” Though performance is in line with guidance, FelCor’s RevPAR is trailing last year. The first 18 days in June were down 4.8% while April and May were off 10.9% and 7.1%, respectively.