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Debt | 9 Months Ended
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Sep. 09, 2011
Debt Disclosure [Abstract] |
Debt | Debt The following table sets forth information regarding the Company’s debt as of September 9, 2011 (unaudited), in thousands:
Property |  | Principal Balance |  | Interest Rate
Courtyard Manhattan / Midtown East |  | $ | 42,390 |  |  | 8.81%
Marriott Salt Lake City Downtown |  | 30,591 |  |  | 5.50%
Courtyard Manhattan / Fifth Avenue |  | 50,841 |  |  | 6.48%
Renaissance Worthington |  | 55,746 |  |  | 5.40%
Frenchman’s Reef & Morning Star Marriott Beach Resort |  | 59,880 |  |  | 5.44%
Marriott Los Angeles Airport |  | 82,600 |  |  | 5.30%
Orlando Airport Marriott |  | 58,520 |  |  | 5.68%
Chicago Marriott Downtown Magnificent Mile |  | 215,027 |  |  | 5.975%
Renaissance Austin |  | 83,000 |  |  | 5.507%
Renaissance Waverly |  | 97,000 |  |  | 5.503%
Hilton Minneapolis |  | 99,415 |  |  | 5.464%
JW Marriott Denver at Cherry Creek |  | 42,085 |  |  | 6.47%
Courtyard Denver Downtown |  | 27,140 |  |  | 6.26%
Debt premiums |  | 1,653 |  |  |
Total mortgage debt |  | 945,888 |  |  |
Senior unsecured credit facility |  | 130,000 |  |  | LIBOR + 3.00% (3.22% at September 9, 2011)
Total debt |  | $ | 1,075,888 |  |  |
Weighted-Average Interest Rate |  |  |  | 5.54%
Mortgage Debt We have incurred limited recourse, property specific mortgage debt in conjunction with certain of our hotels. In the event of default, the lender may only foreclose on the pledged assets; however, in the event of fraud, misapplication of funds or other customary recourse provisions, the lender may seek payment from us. As of September 9, 2011, 14 of our 26 hotel properties were secured by mortgage debt, including the $100 million mortgage secured by the Radisson Lexington Hotel New York that is held as security under our senior unsecured credit facility. Our mortgage debt contains certain property specific covenants and restrictions, including minimum debt service coverage ratios that trigger “cash trap” provisions as well as restrictions on incurring additional debt without lender consent. We are currently in compliance with the financial covenants of our mortgage debt. On April 15, 2011, we closed on a $100 million loan secured by a mortgage on the Hilton Minneapolis. The loan has a 10-year term, bears interest at an annual fixed interest rate of 5.464%, amortizes on a 25-year schedule and is non-recourse, subject to standard recourse exceptions. On May 19, 2011, in connection with our acquisition of the JW Marriott Denver at Cherry Creek, we assumed a $42.4 million loan secured by a mortgage on the hotel. The loan bears an annual fixed interest rate equal to 6.47%, amortizes on a 25-year schedule and matures on July 1, 2015. We reviewed the terms of the mortgage loan in conjunction with the hotel purchase accounting and concluded that the interest rate was above current market. Accordingly, we recorded a $1.5 million debt premium to record the debt at fair value as of the acquisition date. The debt premium will be amortized over the remaining life of the loan to interest expense. On July 22, 2011, in connection with our acquisition of the Courtyard Denver Downtown, we assumed a $27.2 million loan secured by a mortgage on the hotel. The loan bears an annual fixed interest rate equal to 6.26%, amortizes on a 30-year schedule and matures on August 5, 2012. We reviewed the terms of the mortgage loan in conjunction with the hotel purchase accounting and concluded that the interest rate was above current market. Accordingly, we recorded a $0.3 million debt premium to record the debt at fair value as of the acquisition date. The debt premium will be amortized over the remaining life of the loan to interest expense. In connection with the renovation and repositioning project at the Frenchman’s Reef & Morning Star Marriott Beach Resort, we received consent for the project from the lender of the mortgage loan secured by this hotel. In connection with receiving the consent, we were required to deposit $3.4 million into a reserve account for debt service during the renovation project and to establish a lender-held reserve for the project. In addition, we were required to deposit $24.5 million into lender and other escrow reserves for the funding of the renovation. As of September 9, 2011, the reserve funds for the renovation have been substantially used. Senior Unsecured Credit Facility On June 2, 2011, we amended and restated our $200.0 million unsecured credit facility, which now expires in August 2014. The maturity date of the facility may be extended for an additional year upon the payment of applicable fees and the satisfaction of certain other customary conditions. We also have the right to increase the amount of the facility up to $400 million with lender approval. Interest is paid on the periodic advances under the facility at varying rates, based upon LIBOR, plus an agreed upon additional margin amount. The applicable margin is based upon the Company’s ratio of net indebtedness to EBITDA, as follows:
Ratio of Net Indebtedness to EBITDA |  | Applicable Margin
Less than 4.00 to 1.00 |  | 2.25 | %
Greater than or equal to 4.00 to 1.00 but less than 5.00 to 1.00 |  | 2.50 | %
Greater than or equal to 5.00 to 1.00 but less than 5.50 to 1.00 |  | 2.75 | %
Greater than or equal to 5.50 to 1.00 but less than 6.00 to 1.00 |  | 3.00 | %
Greater than or equal to 6.00 to 1.00 |  | 3.25 | %
In addition to the interest payable on amounts outstanding under the facility, we are required to pay an amount equal to 0.40% of the unused portion of the facility if the unused portion of the facility is greater than 50% or 0.30% if the unused portion of the facility is less than or equal to 50%. The facility contains various corporate financial covenants. A summary of the most restrictive covenants is as follows:
|  |  | Actual at
| Covenant |  | September 9, 2011
Maximum leverage ratio(1) | 60% |  | 45.9%
Minimum fixed charge coverage ratio(2) | 1.50x |  | 2.1x
Minimum tangible net worth(3) | $1.8 billion |  | $1.97 billion
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(1) | Leverage ratio is total indebtedness, as defined in the credit agreement which includes our commitment on the Time Square development hotel, divided by total asset value, defined in the credit agreement as a) total cash and cash equivalents plus b) the value of our owned hotels based on (i) until March 31, 2012, appraised values and (ii) after March 31, 2012, hotel net operating income divided by an 8.5% capitalization rate, and (c) the book value of the Allerton loan.
(2) | Fixed charge coverage ratio is Adjusted EBITDA, defined in the credit agreement as EBITDA less FF&E reserves, for the most recently ending 12 fiscal months, to fixed charges, defined in the credit agreement as interest expense, all regularly scheduled principal payments and payments on capitalized lease obligations, for the same most recently ending 12 fiscal month period.
(3) | Tangible net worth, as defined in the credit agreement, is (i) total gross book value of all assets, exclusive of depreciation and amortization, less intangible assets, total indebtedness, and all other liabilities, plus (ii) 85% of net proceeds from future equity issuances.
The facility requires us to maintain a specific pool of unencumbered borrowing base properties. The unencumbered borrowing base assets are subject, among other restrictions, to the following limitations and covenants:
• | A minimum of 5 properties with an unencumbered borrowing base value, as defined in the credit agreement, of not less than $250 million.
• | The unencumbered borrowing base must include the Westin Boston Waterfront, the Conrad Chicago and the Vail Marriott Mountain Resort and Spa. The Conrad Chicago and the Vail Marriott Mountain Resort and Spa may be released from the unencumbered borrowing base upon lender approval and certain conditions.
In connection with the closing of the Hilton Minneapolis mortgage loan in April 2011, we received lender approval to release the Company’s subsidiaries owning the Hilton Minneapolis as guarantors under the facility. On May 24, 2011, we borrowed $115.0 million under the facility to fund a portion of our acquisition of the Radisson Lexington Hotel New York. In conjunction with the acquisition, the seller's $100.0 million mortgage secured by the hotel was assigned to us and we added the mortgage as security to the facility. We have the ability to repay the $100.0 million and release the mortgage as security for the facility at any time. On July 21, 2011, we borrowed $15.0 million under the facility to fund a portion of our acquisition of the Courtyard Denver Downtown. As of September 9, 2011, we had $130.0 million in borrowings outstanding under the facility and the Company's ratio of net indebtedness to EBITDA was 5.9 x. Accordingly, interest on our borrowings under the facility will continue to be based on LIBOR plus 300 basis points. We incurred interest and unused credit facility fees on the facility of $0.8 million and $0.2 million for our fiscal quarters ended September 9, 2011 and September 10, 2010, and $1.5 million and $0.4 million for the periods from January 1, 2011 to September 9, 2011 and January 1, 2010 to September 10, 2010, respectively.

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.5-02.19,20,22) -URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 129 -Paragraph 2, 4 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 02 -Paragraph 19, 20, 22 -Article 5 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21475-112644 + Details
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