In an early update on third quarter performance, Park Hotels & Resorts officials said 59% of their portfolio is now open based on total room count.
TYSONS, Va.--Sept. 14, 2020-- Park Hotels & Resorts Inc. (“Park” or the “Company”) (NYSE: PK) today provided an operational and liquidity update.
- Reopened 14 hotels since June, increasing the total number of hotels open to 46 of 60 hotels (77%), or 59% of total room count;
- Occupancy improved to 32.3% for Park’s 33 consolidated hotels open during the entirety of July and 38.8% for Park’s 37 consolidated hotels open during the entirety of August;
- Initiated permanent property-level full-time staff reductions, representing expected future annual savings of $50 million to $70 million throughout the portfolio based on 2019 operations; continuing its efforts to remove costs from the hotel operating model;
- Agreed to an increase in aggregate commitments under the revolving credit facility (the “Revolver”) and near-term liquidity by $75 million to $1.075 billion and agreed to extend $901 million of the aggregate commitments for two years to December 2023; and
- Agreed to amend its bank credit facilities to obtain additional financial covenant relief and increase its carve out for acquisitions funded with equity proceeds from $500 million to $1 billion, among other amended provisions.
Thomas J. Baltimore, Jr., Chairman and Chief Executive Officer, stated, “I am extremely pleased with the progress we have made on many fronts as we continue to navigate this crisis. Over the past couple of months, we have opened additional hotels and experienced better than expected results through July and August, and we have begun to quantify and execute on cost-savings initiatives as we work with our operating and brand partners to reposition the operating model. Additionally, we have completed an amendment process with our lending partners to extend our revolving credit facility by two years, further improving our liquidity position and providing us additional flexibility as we look to turn the corner and pursue opportunities as they develop in the coming months. I would like to personally thank all of our partners and stakeholders for their efforts in support of Park as we weather this global pandemic.”
Hotel Reopening Update
Reopened 10 hotels in July, 2 hotels in August and 2 hotels to date in September;
Expects to reopen an additional 12 hotels during the 4th quarter, increasing the total number of open hotels to 58, or 97% of the portfolio room count, with the remaining 2 suspended hotels expected to open in Q1 2021;
The current status of Park’s hotels as of September 14, 2020 is as follows:
Includes total number of rooms at unconsolidated hotels.
The below table reflects changes in Pro-forma ADR, Occupancy and RevPAR for each month in 2020 compared to the same period in 2019 and Pro-forma Occupancy for 2020 for all of Park’s current 53 consolidated hotels during each month presented:
The below table reflects changes in Pro-forma ADR, Occupancy and RevPAR for each month in 2020 compared to the same period in 2019 and Pro-forma Occupancy for 2020 for consolidated hotels open during the entirety of each month presented:
Park’s estimated hotel level break-even occupancy is 35% to 40%, assuming a 15% to 20% decrease in ADR compared to the comparable period in 2019. For the month of July 2020, the Company had 11 hotels reach operational break-even levels (inclusive of one unconsolidated joint venture hotel).
Park had cash and cash equivalents of $1,248 million, including $35 million of restricted cash as of July 31, 2020. Park’s actual monthly average burn rate during the second quarter of 2020 was $59 million based on operations during that period and was reduced to $51 million during July 2020. With current total liquidity of $1.5 billion, including the $0.3 billion of available capacity remaining under the Company’s revolving credit facility, and a burn rate of approximately $50 million per month, which takes into account current operations from both open and suspended hotels and uses an accrual-based methodology, Park estimates it currently has approximately two and a half years of liquidity available to meet its financial obligations.
This estimate does not take into account capital expenditures (which were reduced by 75% in 2020 to approximately $4 million per month) or any possible alternative sources of revenue that may arise, any hotel property dispositions for the remainder of the year or payment of cash dividends or other distributions not already declared and paid in 2020, if any. This estimate also does not take into account the impact of the amendments to the credit facility as discussed further below. The estimated burn rate has not been reduced by any amount available to Park under existing or future debt facilities, or proceeds from issuance of any additional debt, equity or equity-linked securities.
Park continues to take proactive measures to reduce the near-term burn rate, including deferral of payments, hiring freezes and other cost reduction measures.
Credit Facility Amendments
Park announced today that it has entered into further amendments (the “September Credit Amendments”) to its Revolver, its $631 million term loan due December 2021 (the “2016 Term Loan”) and its existing $670 million term loan (the “2019 Term Loan”). The effectiveness of the September Credit Amendments is subject to certain conditions, including the prepayment in full of the 2016 Term Loan using the proceeds of certain permitted capital markets transactions (such effective date, the “Amendments Effective Date”).
The September Credit Amendments will increase the commitments under the Revolver by $75 million to $1.075 billion, extend the waiver period for the testing of the financial covenants from the date the financial statements are delivered for the quarter ending June 30, 2021 to the date the financial statements are delivered for the quarter ended March 31, 2022, and extend the maturity of the Revolver to December 2023 with respect to 90.1% of the Revolver commitments as of the Amendments Effective Date.
Key terms of the September Credit Amendments include the following:
- Increase in the commitments under the Revolver by $75 million to $1.075 billion;
- Extension of the Revolver maturity date from December 2021 to December 2023 with respect to $901 million of the commitments under the Revolver as of the Amendments Effective Date, including all $75 million of the increased Revolver commitments;
- Extension of the existing waiver period for testing of the financial covenants, providing covenant relief until the date the financial statements are delivered for the first quarter of 2022, unless earlier terminated by Park at its discretion;
- Extension of the temporary periods for which certain financial covenants are adjusted once quarterly testing of financial covenants resumes;
- Increase of mandatory repayment carve out for equity issuances from $500 million to $1 billion, so long as proceeds from the issuances are used for capex and hotel acquisitions which become part of the unencumbered pool;
- Existing guarantees by certain Park-affiliated entities remain in place until repayment of the Revolver and 2019 Term Loan and existing pledges of equity interests in Park-affiliated entities owning certain unencumbered assets remain in place during the extended waiver period and until the ratio of net debt to EBITDA falls below 6.50x for two consecutive quarters;
- Extension of minimum liquidity covenant through December 2022 and adjustment to include, through December 24, 2021, 50% of the Revolver commitments that mature in December 2021;
- Addition of ability to pay a $0.01 per share per fiscal quarter dividend during the extended waiver period; and
- Modifications to certain restrictions and covenants for the duration of the extended waiver period, including certain mandatory prepayments.
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