RLJ RLJ Lodging Trust

Item 1.01. Entry into a Material Definitive Agreement.

On June 24, 2020 (the “Effective Date”), RLJ Lodging Trust (the “Company”), as parent guarantor, RLJ Lodging Trust, L.P., the Company’s operating partnership (the “Operating Partnership”), as borrower, and certain subsidiaries of the Company as guarantors (the “Subsidiary Guarantors”) entered into (1) a First Amendment to Third Amended and Restated Credit Agreement (the “Credit Facility Amendment”) with Wells Fargo Bank, National Association (“Wells Fargo”), as administrative agent, and the other lenders party thereto and (2) an Eighth Amendment to Term Loan Agreement (the “Term Loan Amendment” and, together with the Credit Facility Amendment, the “Amendments”) with Wells Fargo, as administrative agent, and the other lenders party thereto. The Credit Facility Amendment amends that certain Third Amended and Restated Credit Agreement, dated as of December 18, 2019 (the “Credit Agreement”), among the Company, the Operating Partnership, Wells Fargo, as administrative agent, and the lenders from time to time party thereto, which provides for (i) a $600 million unsecured revolving credit facility (the “Revolver”) with a scheduled maturity date of May 18, 2024 (subject to a one year extension option), (ii) a $400 million unsecured term loan (the “Tranche A-1 Term Loan”) with a scheduled maturity date of January 25, 2023, and (iii) a $400 million unsecured term loan (the “Tranche A-2 Term Loan”) with a scheduled maturity date of May 18, 2025. The Term Loan Amendment amends that certain Term Loan Agreement, dated as of November 20, 2012 (as previously amended, the “Term Loan Agreement”), among the Company, the Operating Partnership, Wells Fargo, as administrative agent, and the lenders from time to time party thereto, which provides for an unsecured term loan of $225 million with a scheduled maturity date of January 25, 2023 (the “Five Year Term Loan” and, together with the Tranche A-1 Term Loan and the Tranche A-2 Term Loan, the “Term Loans”).

The Amendments (1) suspend the testing of all existing financial maintenance covenants under the Credit Agreement and the Term Loan Agreement for all periods from and after the Effective Date through and including the fiscal quarter ending March 31, 2021 (such period, the “Covenant Relief Period”) and (2) for periods following the Covenant Relief Period, provide certain less restrictive levels for the maximum ratio of net debt to EBITDA (the “Leverage Ratio”) and minimum ratio of unencumbered adjusted NOI to unsecured interest expense (the “Unencumbered Debt Service Coverage Ratio”) as follows:

The Amendments also amend the required minimum Unencumbered Debt Service Coverage Ratio that would have been applicable for the fiscal quarter ended March 31, 2020 to reduce the required minimum Unencumbered Debt Service Coverage Ratio for such fiscal quarter from 2.00 to 1.00 to 1.50 to 1.00.

Pursuant to the Amendments, during the period beginning on the Effective Date and terminating on the date that financial statements are delivered for the fiscal quarter ending June 30, 2021 (such period, the “Restriction Period”), (1) the Company will be required to maintain a minimum liquidity level of $125 million, (2) the net cash proceeds from asset sales, equity issuances and incurrences of indebtedness will, subject to various exceptions, be required to be applied as a mandatory prepayment of certain amounts outstanding under the Credit Agreement, the Term Loan Agreement and certain other pari passu debt (including the 2014 Term Loan discussed under “Item 8.01. Other Events” below), (3) additional negative covenants limit the ability of the Company and its subsidiaries to incur additional indebtedness, make prepayments of other indebtedness, make dividends and distributions (with certain exceptions, including for the payment of a cash dividend of $0.01 per common share, the payment of a cash dividend on the Company’s Series A Cumulative Convertible Preferred Shares and other payments for purposes of maintaining REIT status) and stock repurchases, make capital expenditures, make investments, including acquisitions or mergers, in each case, subject to various exceptions and (4) the equity interests in subsidiaries of the Company that are Subsidiary Guarantors or otherwise directly or indirectly own unencumbered properties are, subject to certain exceptions, required to be pledged to secure on a pari passu basis the obligations owing in respect of the Credit Agreement, the Term Loan Agreement and certain other pari passu debt (including the 2014 Term Loan). The equity pledge requirement is required to be satisfied during the 30-day period following the Effective Date and will continue following the Restriction Period until such time as the Leverage Ratio is no greater than 6.50 to 1.00 for two consecutive fiscal quarters . The Restriction Period and the Covenant Relief Period may, at the Operating Partnership’s election, be terminated early if, among other things, the Company is at such time able to comply with the financial covenants that apply immediately after the Covenant Relief Period.

The Amendments further provide that, until the earlier of (1) the earlier of (x) July 1, 2022 or (y) the day after the end of the fifth fiscal quarter immediately following the end of the Covenant Relief Period and (2) such time as the Leverage Ratio is less than or equal to 7.00 to 1.00, borrowings under the Credit Agreement and the Term Loan Agreement will bear interest, at the Operating Partnership’s election, at a per annum rate of (i) in the case of the Revolver, (a) LIBOR plus a margin of 230 basis points or (b) a base rate plus a margin of 130 basis points, and (ii) in the case of each of the Term Loans, (a) LIBOR plus a margin of 225 basis points or (b) a base rate plus a margin of 125 basis points.  The Amendments also add a floor of 0.25% to the LIBOR interest rate determination, subject to certain exceptions, under both the Credit Agreement and the Term Loan Agreement.

As of the Effective Date, the Company had $400 million outstanding under the Revolver and $400 million outstanding under the Tranche A-1 Term Loan, $400 million outstanding under the Tranche A-2 Term Loan and $225 million outstanding under the Five Year Term Loan.

Except as amended by the relevant Amendment, the terms of the Credit Agreement and the Term Loan Agreement remain in full force and effect. The foregoing summary of the Credit Agreement Amendment and the Term Loan Amendment is qualified in its entirety by reference to the Credit Agreement Amendment and the Term Loan Amendment, copies of which are attached to this Current Report on Form 8-K as Exhibits 10.1 and 10.2, respectively, and incorporated herein by reference.