Business

Amendment or Extension of Unsecured Debt or Revolving Line of Credit. Stock to Watch Sunstone Hotel Investors Inc (NYSE: SHO) and Retail Properties of America Inc (NYSE: RPAI)

Sunstone Hotel Investors Inc (NYSE: SHO) is a crucial player in the hospitality industry, has successfully amended its agreement to increase the borrowings limit and use the proceeds for acquisition. On the Other hand, Retail Properties of America Inc (NYSE: RPAI) amended its unsecured revolving line of credit.

Covenant Waiver Period Removed: Sunstone announced that its investor has successfully amended its agreement, governing the company’s position in unsecured debt, includes Sunstone’s $500 million revolving credit facility, outstanding private placement senior notes of $205 million, and $185 million of funded term loan facilities. As per the amended agreement, specific restrictions limiting the company’s ability to acquire unencumbered hotels can be completed during the covenant period. 

Furthermore, the agreement also states that no covenant restrictions limit non-equity (debt) funded acquisition to $250 million on the higher side. In addition, the agreement also states that Sunstone’s revolving credit facility and funded term loans require a compulsory prepayment from the proceeds received from the sale of assets. As a result, the covenant is waived off till March 31, 2022, and removes the restrictions of maintaining a minimum liquidity position.

Money Raised to maintain covenant: Retail Properties of America Inc (NYSE: RPAI) recently closed the amendment and extended its unsecured revolving line of credit to the tune of $850 million. It means the company’s borrowing capacity now stands at $850 million. Furthermore, the amendment helps the company increase its liquidity position by increasing its borrowing capacity by $750 million to $1.6 billion. It will help the company to maintain specific covenants and also a 6.5% capitalization rate. It also extends the maturity date to January 8, 2026, from April 20, 2022. Moreover, it improves rating-based grades by 10-15 basis points on the investment-grade ratings and maintains current leverage-based grid pricing. All this is done to maintain or improve the sustainability metric based on greenhouse gas emission norms.

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