Winston Hotels replaced its existing $140 million revolving credit line with a $125 million line because it did not need as much money and was looking to save on what it would pay on the unused portion of the loan. Other than its size, the new credit essentially mirrors the old: both are three-year revolvers collateralized by 28 hotel properties with similar covenants, explained Joseph Green, executive v.p. of acquisitions and finance.
Last quarter Winston drew down only $105 million of the available $140 million, so when the company renewed its line last December it reduced the amount, explained Green. Taking into account the advancement rates available under a new facility, the company decided that a $125 million revolver was the appropriate amount. Although the company is taking a smaller credit, it is paying more -- LIBOR plus 2% versus LIBOR plus 145 basis points -- because the original deal was set three years ago. Green said, however, that the company is satisfied with the deal because the 200 basis points spread is actually under the current market. He noted that the current market "is 250 300 [basis points], so we are really pleased." The undermarket pricing is a result of a strong relationship fostered between lead bank Wachovia Bank and Winston Hotels over the last 20 years, he added. "It's primarily [because] it's been a good relationship for both parties," he said.
BBNT, Royal Bank of Canada, andSouth Trust Bank, join Wachovia in the syndicate. The credit will be used to acquire properties.