Interstate Hotels & Resorts, an Arlington Va.-based hotel management company, has boosted its borrowing capacity to pay off $40 million of more expensive subordinated debt. Société Générale led the amendment, which saw the $64.5 million credit facility expanded to a $53 million term loan and $55 million revolver and the maturity extended to 2008.
"The amendment was something we had looked at for some time. It allowed us to pay off the sub debt, which has a higher interest rate and it also creates greater capacity to invest in joint ventures," said Bruce Riggins, Interstate's senior v.p. and treasurer. In addition, "The bank market has been pretty strong in general. It was an opportunity. We completed a merger a couple of years ago so we have a couple of years of operation under the new merged company. I think people understood the business better, which allowed us to go out and be able to do a larger facility size."
Interstate can expand the credit an additional $50 million, though the company would have to look for more banks. "We still have $50 million of additional capacity so we would be more than happy to get additional banks in there," Riggins said.
The $40 million subordinated-term debt was priced at LIBOR plus 8 1/2%, while the new term loan is priced at LIBOR plus 4 1/2-5 1/2%. The revolver is priced at LIBOR plus 3 1/4-1/2%. Interstate's previous bank deal comprised a $16.5 million term loan and $27 million was outstanding of a $48 million revolver.
Five major banks participated in the old credit, while a total of 10 banks and funds are in the new syndicate. "We really look at it as a new credit facility because we have a different type of investor," Riggins said. The old syndicate "was more of a relationship deal with some of the banks that we knew pretty well," Riggins said. Calyon and Citigroup continue to be involved in the credit.