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Debt | 9 Months Ended
--- | ---
Sep. 07, 2012
Debt Disclosure [Abstract] |
Debt | Debt The following table sets forth information regarding the Company’s debt as of September 7, 2012 (unaudited), in thousands:
Property |  | Principal Balance |  | Interest Rate
Courtyard Manhattan / Midtown East |  | $ | 42,029 |  |  | 8.81%
Marriott Salt Lake City Downtown |  | 29,173 |  |  | 5.50%
Courtyard Manhattan / Fifth Avenue |  | 50,355 |  |  | 6.48%
Renaissance Worthington |  | 54,985 |  |  | 5.40%
Frenchman’s Reef & Morning Star Marriott Beach Resort |  | 59,014 |  |  | 5.44%
Marriott Los Angeles Airport |  | 82,600 |  |  | 5.30%
Orlando Airport Marriott |  | 57,838 |  |  | 5.68%
Chicago Marriott Downtown Magnificent Mile |  | 212,445 |  |  | 5.975%
Hilton Minneapolis |  | 97,547 |  |  | 5.464%
JW Marriott Denver at Cherry Creek |  | 41,103 |  |  | 6.47%
Lexington Hotel New York |  | 170,368 |  |  | LIBOR + 3.00% (3.23% at September 7, 2012)
Debt premium |  | 1,014 |  |  |
Total mortgage debt |  | 898,471 |  |  |
Senior unsecured credit facility |  | 120,000 |  |  | LIBOR + 2.50% (2.75% at September 7, 2012)
Total debt |  | $ | 1,018,471 |  |  |
Weighted-Average Interest Rate |  |  |  | 5.17%
Mortgage Debt We have incurred limited recourse, property specific mortgage debt secured by certain of our hotels. In the event of default, the lender may only foreclose on the secured 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 7, 2012, 11 of our 27 hotels were secured by mortgage debt. 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. As of September 7, 2012, we are in compliance with the financial covenants of our mortgage debt. On February 7, 2012, we prepaid in full the $27.0 million mortgage loan secured by the Courtyard Denver Downtown without a prepayment penalty. In connection with the prepayment, we wrote off the unamortized debt premium of $0.1 million associated with the mortgage and recorded a gain on early extinguishment of debt. On March 9, 2012, we closed on a limited recourse $170.4 million loan secured by a mortgage on the Lexington Hotel New York. The loan has a term of three years and may be extended for two additional one-year terms subject to the satisfaction of certain terms and conditions, including the payment of an extension fee. The loan bears interest at a floating rate of one-month LIBOR plus 300 basis points. The financing includes $25 million of corporate recourse, which will be eliminated when the hotel achieves a specific debt yield test, the planned capital renovation for the hotel is completed and certain other conditions are met. Subsequent to the quarter ended September 7, 2012, we were required to deposit $4.0 million into an escrow account upon termination of the Radisson franchise agreement and the escrow will be released upon completion of the renovation. In connection with the loan, we entered into a three-year interest rate cap agreement, which caps one-month LIBOR at 125 basis points. The cost of the interest rate cap was $0.9 million and is included in prepaid and other assets on the accompanying condensed consolidated balance sheet. Each reporting period the carrying value is adjusted to fair market value, with the accompanying charge or credit to interest expense. As of September 7, 2012, the fair market value of the interest rate cap was $0.2 million (see Note 13). On March 23, 2012, in connection with the sale of a three-hotel portfolio, the buyer assumed $97 million of mortgage debt secured by the Renaissance Waverly and $83 million of mortgage debt secured by the Renaissance Austin. Senior Unsecured Credit Facility We are party to a $200.0 million unsecured credit facility, which 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 7, 2012
Maximum leverage ratio (1) | 60% |  | 49.6%
Minimum fixed charge coverage ratio (2) | 1.50x |  | 2.23x
Minimum tangible net worth (3) | $2.0 billion |  | $2.2 billion
Secured recourse indebtedness | $25 million |  | $25 million
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(1) | Leverage ratio is total indebtedness, as defined in the credit agreement which includes our commitment on the Times 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 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 satisfaction of certain other conditions.
In conjunction with the closing of the $170.4 million loan secured by the Lexington Hotel New York, we repaid the existing outstanding balance on the facility. In addition, the $100.0 million mortgage secured by the Lexington Hotel New York was released as security for the facility. As of September 7, 2012, there was $120.0 million outstanding under the facility and the Company's ratio of net indebtedness to EBITDA was 4.98x. Accordingly, interest on any draws under the facility will continue to be based on LIBOR plus 250 basis points for the next fiscal quarter. We incurred interest and unused credit facility fees on the facility of $0.7 million and $0.8 million for our fiscal quarters ended September 7, 2012 and September 9, 2011, respectively, and $1.7 million and $1.5 million for the periods from January 1, 2012 to September 7, 2012 and January 1, 2011 to September 9, 2011, respectively. Subsequent to the end of the quarter, we repaid a net $35 million of the amount outstanding under the facility using the net proceeds from the sale of the Atlanta Westin North at Perimeter.

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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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