Braemar Hotels & Resorts Inc.BHR
Braemar Hotels & Resorts Inc. Debt Disclosure
Indebtedness, net
Indebtedness, net consisted of the following (dollars in thousands):
| Indebtedness | Collateral | Current Maturity | Final Maturity (12) | Interest Rate | December 31, 2021 | December 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||
| Debt Balance | Book Value of Collateral | Debt Balance | Book Value of Collateral | |||||||||||||||||||||||||||||||||||||||||||||||
Mortgage loan (3) | Park Hyatt Beaver Creek Resort & Spa | April 2022 | April 2022 | LIBOR (1) +3.00% | $ | 67,500 | $ | 137,718 | $ | 67,500 | $ | 140,516 | ||||||||||||||||||||||||||||||||||||||
Mortgage loan (4) | The Notary Hotel | June 2022 | June 2025 | LIBOR (1) + 2.16% | 435,000 | 417,109 | 435,000 | 439,215 | ||||||||||||||||||||||||||||||||||||||||||
| The Clancy | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Sofitel Chicago Magnificent Mile | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Marriott Seattle Waterfront | ||||||||||||||||||||||||||||||||||||||||||||||||||
Mortgage loan (5) | The Ritz-Carlton St. Thomas | August 2022 | August 2024 | LIBOR (1) + 3.95% | 42,500 | 124,114 | 42,500 | 130,216 | ||||||||||||||||||||||||||||||||||||||||||
Term loan (6) | Equity | October 2022 | October 2022 | Base Rate (2) + 1.25% to 2.65% or LIBOR (1) + 2.25% to 3.65% | — | — | 61,495 | — | ||||||||||||||||||||||||||||||||||||||||||
Mortgage loan (7) | The Ritz-Carlton Sarasota | April 2023 | April 2023 | LIBOR (1) + 2.65% | 99,500 | 162,621 | 100,000 | 163,814 | ||||||||||||||||||||||||||||||||||||||||||
Mortgage loan (7) (8) | Hotel Yountville | May 2023 | May 2023 | LIBOR (1) + 2.55% | 51,000 | 85,847 | 51,000 | 87,795 | ||||||||||||||||||||||||||||||||||||||||||
Mortgage loan (7) (8) | Bardessono Hotel and Spa | August 2023 | August 2023 | LIBOR (1) + 2.55% | 40,000 | 53,413 | 40,000 | 56,645 | ||||||||||||||||||||||||||||||||||||||||||
Mortgage loan (7) | The Ritz-Carlton Lake Tahoe | January 2024 | January 2024 | LIBOR (1) + 2.10% | 54,000 | 112,713 | 54,000 | 113,821 | ||||||||||||||||||||||||||||||||||||||||||
Mortgage loan (9) | Capital Hilton | February 2024 | February 2024 | LIBOR (1) + 1.70% | 195,000 | 193,194 | 197,229 | 203,918 | ||||||||||||||||||||||||||||||||||||||||||
| Hilton La Jolla Torrey Pines | ||||||||||||||||||||||||||||||||||||||||||||||||||
Mortgage loan (10) | Mr. C Beverly Hills Hotel | August 2024 | August 2024 | LIBOR (1) + 3.60% | 30,000 | 73,587 | — | — | ||||||||||||||||||||||||||||||||||||||||||
Mortgage loan (7) | Pier House Resort & Spa | September 2024 | September 2024 | LIBOR (1) + 1.85% | 80,000 | 85,281 | 80,000 | 88,650 | ||||||||||||||||||||||||||||||||||||||||||
Convertible Senior Notes (11) | Equity | June 2026 | June 2026 | 4.50% | 86,250 | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| 1,180,750 | 1,445,597 | 1,128,724 | 1,424,590 | |||||||||||||||||||||||||||||||||||||||||||||||
| Capitalized default interest and late charges | 3,904 | 7,304 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Deferred loan costs, net | (3,538) | (5,434) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Discounts, net | (8,438) | — | ||||||||||||||||||||||||||||||||||||||||||||||||
| Indebtedness, net | $ | 1,172,678 | $ | 1,445,597 | $ | 1,130,594 | $ | 1,424,590 | ||||||||||||||||||||||||||||||||||||||||||
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(1)LIBOR rates were 0.101% and 0.144% at December 31, 2021 and December 31, 2020, respectively.
(2)Base Rate, as defined in the secured term loan agreement, is the greater of (i) the prime rate set by Bank of America, or (ii) federal funds rate + 0.5%, or (iii) LIBOR + 1.0%.
(3)Effective January 9, 2021, we amended this mortgage loan. Terms of the agreement included monthly FF&E escrow deposits being waived from January 2021 through June 2021. This mortgage loan has three one-year extension options, subject to satisfaction of certain conditions, of which the third was exercised in April 2021.
(4)This mortgage loan has five one-year extension options, subject to satisfaction of certain conditions, of which the second was exercised in June 2021.
(5)This mortgage loan has three one-year extension options, subject to satisfaction of certain conditions, of which the first was exercised in August 2021. This mortgage loan has a LIBOR floor of 1.00%.
(6)Effective February 22, 2021, we amended this term loan. In conjunction with the amendment, the interest rate spread increased from a rate of Base Rate + 1.25% - 2.50% or LIBOR + 2.25% - 3.50% to a Base Rate + 1.25% - 2.65% or LIBOR + 2.25% - 3.65%, with a LIBOR floor of 0.50%. On May 18, 2021, we repaid this term loan in full.
(7)Effective December 31, 2020, we amended this mortgage loan. Terms of the agreement included monthly FF&E escrow deposits being waived from January 2021 through December 2021. This mortgage loan has a LIBOR floor of 0.25%.
(8)On September 23, 2021, we amended this mortgage loan. Terms of the agreement included extending the current and final maturity dates by one year.
(9)Effective March 5, 2021, we amended this mortgage loan. Terms of the agreement included monthly FF&E escrow deposits waived through July 1, 2021.
(10)This mortgage loan has a LIBOR floor of 1.50%.
(11)On May 18, 2021, we executed a purchase agreement to sell convertible senior notes in a private offering. In conjunction with the private offering, we sold convertible senior notes with an aggregate principal amount of $86.25 million.
(12)The final maturity date assumes all available extensions options will be exercised.
During the second and third quarters of 2020, we reached forbearance and other agreements with our lenders relating to loans secured by the Pier House Resort & Spa, The Ritz-Carlton Sarasota, The Ritz-Carlton Lake Tahoe, Hotel Yountville, Bardessono Hotel and Spa, Sofitel Chicago Magnificent Mile, The Notary Hotel, The Clancy, Marriott Seattle Waterfront, Capital Hilton and Hilton La Jolla Torrey Pines. As of December 31, 2021, no loans are in default. See note 15 for discussion of the loan modification agreement with Lismore Capital LLC (“Lismore”). The Company determined that all of the forbearance and other agreements evaluated were considered troubled debt restructurings due to terms that allowed for deferred interest and the forgiveness of default interest and late charges. No gain or loss was recognized during 2020, as the carrying amount of the original loans was not greater than the undiscounted cash flows of the modified loans.
As a result of the troubled debt restructurings, all accrued default interest and late charges were capitalized into the applicable loan balances and are being amortized over the remaining term of the loans using the effective interest method. The amount of default interest and late charges capitalized into indebtedness for the year ended December 31, 2020 was $9.9 million. The amount of principal amortization for the years ended December 31, 2021 and 2020 was $3.4 million and $2.6 million, respectively.
On August 5, 2021, in connection with the acquisition of the Mr. C Beverly Hills Hotel and the adjacent residences, the Company assumed a $50 million mortgage loan and repaid $20 million upon closing. This mortgage loan provides for an interest rate of LIBOR + 3.60%. The mortgage loan is interest only with a stated maturity in August 2024.
Convertible Senior Notes
In May 2021, the Company issued $86.25 million aggregate principal amount of 4.50% Convertible Senior Notes due June 2026 (the “Convertible Senior Notes”). The net proceeds from this offering of the Convertible Senior Notes were approximately $82.8 million after deducting the underwriting fees and other expenses paid by the Company. A portion of the proceeds were used to fully repay the secured term loan.
The Convertible Senior Notes are governed by an indenture (the “Base Indenture”) between the Company and U.S. Bank National Association, as trustee. The Convertible Senior Notes bear interest at a rate of 4.50% per annum, payable semi-annually in arrears on June 1 and December 1 of each year, beginning on December 1, 2021. The Convertible Senior Notes will mature on June 1, 2026. The Company recorded coupon interest expense of $2.4 million for the year ended December 31, 2021.
The Company separated the Convertible Senior Notes into liability and equity components. The initial carrying amount of the liability component was calculated using a discount rate of 7.1%. The discount rate was based on the terms of debt instruments that were similar to the Convertible Senior Notes. The $6.3 million carrying amount of the equity component representing the conversion option was determined by deducting the fair value of the liability component from the net proceeds of the Convertible Senior Notes. The amount recorded in equity is not subject to remeasurement or amortization. The initial discount of $9.3 million is accreted to interest expense using the effective interest rate method over the contractual term of the Convertible Senior Notes. The Company recorded discount amortization of $974,000 for the year ended December 31, 2021, with the remaining discount balance to be amortized through June 2026.
The Convertible Senior Notes are convertible at any time prior to the close of business on the business day immediately preceding the maturity date for cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the election of the Company, based on an initial conversion rate of 157.7909 shares of the Company’s common stock per $1,000 principal amount of notes (equivalent to a conversion price of approximately $6.34 per share of common stock), subject to adjustment of the conversion rate under certain circumstances. In addition, following the occurrence of certain corporate events, if the Company provides notice of redemption or if it exercises its option to convert the Convertible Senior Notes, the Company will, in certain circumstances, increase the conversion rate for a holder that converts its Convertible Senior Notes in connection with such corporate event, such notice of redemption, or such issuer conversion option, as the case may be.
The Company may redeem the Convertible Senior Notes at the Company’s option, in whole or in part, on any business day on or after the date of issuance if the last reported sale price per share of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides a notice of redemption at a redemption price equal to 100% of the principal amount of the Convertible Senior Notes to be redeemed subject to certain adjustments, plus accrued and unpaid interest to, but excluding, the redemption date.
If we violate covenants in any debt agreement, we could be required to repay all or a portion of our indebtedness before maturity at a time when we might be unable to arrange financing for such repayment on attractive terms, if at all. The assets of certain of our subsidiaries are pledged under non-recourse indebtedness and are not available to satisfy the debts and other obligations of the consolidated group. As of December 31, 2021, we were in compliance with all covenants.
Maturities and scheduled amortization of indebtedness as of December 31, 2021, assuming no extension of existing extension options for each of the following five years and thereafter are as follows (in thousands):
| 2022 | $ | 546,000 | |||
| 2023 | 189,500 | ||||
| 2024 | 359,000 | ||||
| 2025 | — | ||||
| 2026 | 86,250 | ||||
| Thereafter | — | ||||
| Total | $ | 1,180,750 | |||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2021 | Mar 10, 2022 | Showing above |
| 2020 | Mar 5, 2021 | |
| 2019 | Mar 13, 2020 | |
| 2018 | Mar 8, 2019 | |
| 2017 | Mar 14, 2018 | |
| 2016 | Feb 28, 2017 | |
| 2015 | Mar 15, 2016 | |
About Debt Disclosures
Debt disclosures detail a company's borrowing structure — the types of instruments, interest rates, maturity schedule, and covenant restrictions that define its financial obligations and flexibility. This section is essential for assessing refinancing risk, interest rate exposure, and the margin of safety against financial distress.
Key signals: the maturity schedule reveals concentration risk — large maturities within 1-2 years during tight credit markets can force dilutive refinancing or asset sales. Compare the fair value of debt against carrying amount to gauge whether the market views the company's credit risk differently than the balance sheet suggests. Watch covenant compliance disclosures for tightening cushions, especially leverage and interest coverage ratios. Variable-rate debt exposure quantifies sensitivity to interest rate changes. Secured versus unsecured mix affects recovery rates and future borrowing capacity. Compare net debt-to-EBITDA against industry peers and covenant limits to assess financial health.