Debt

12 Months Ended

Dec. 31, 2022

Debt Disclosure [Abstract]

Debt

Note 7: Debt

Debt balances and associated interest rates as of December 31, 2022 were:

			Principal balance as of
	Interest Rate at December 31, 2022	Maturity Date	December 31, 2022			December 31, 2021
			(in millions)
SF Mortgage Loan	4.11%	November 2023	$	725		$	725
HHV Mortgage Loan	4.20%	November 2026		1,275			1,275
Other mortgage loans(1)	Average rate of 4.35%	2023 to 2027(2)		469			503
Revolver(3)	SOFR + 2.10%	December 2026		50			—
2019 Term Facility(4)	N/A	August 2024		—			78
2025 Senior Notes	7.50%	June 2025		650			650
2028 Senior Notes	5.88%	October 2028		725			725
2029 Senior Notes	4.88%	May 2029		750			750
				4,644			4,706
Add: unamortized premium				3			4
Less: unamortized deferred financing costs and    discount				(30	)		(38	)
			$	4,617		$	4,672

(1) In December 2022, we fully repaid the $26 million mortgage loan secured by the Hilton Checkers Los Angeles.

(2) Assumes the exercise of all extensions that are exercisable solely at our option. The mortgage loan for Hilton Denver City Center matures in 2042 but is callable by the lender with six months of notice. As of December 31, 2022, Park had not received notice from the lender.

(3) As of December 31, 2022, we had approximately $900 million of available capacity under our revolving credit facility ("Revolver").

(4) In December 2022, the 2019 Term Facility was fully repaid.

Mortgage Loans

In October 2016, we entered into a $725 million CMBS loan secured by the Hilton San Francisco Union Square and the Parc 55 Hotel San Francisco (“SF Mortgage Loan”) and a $1.275 billion CMBS loan secured by the Hilton Hawaiian Village (“HHV Mortgage Loan”). Both the SF Mortgage Loan and the HHV Mortgage Loan bear interest at a fixed-rate and require interest-only payments through their respective maturity dates. The SF Mortgage Loan is currently able to be partially or fully repaid, without penalty, and the HHV Mortgage Loan may be partially or fully prepaid, subject to prepayment penalties.

Our mortgage loans, which are associated with our three consolidated VIEs and mortgage loans acquired through the Merger, bear interest at either a fixed-rate or variable rate. Certain of our mortgage loans require interest-only loan payments through their respective maturity dates, and the remaining mortgage loans require payments of both principal and interest on a monthly basis.

We are required to deposit with lenders certain cash reserves for restricted uses. As of December 31, 2022 and December 31, 2021, our consolidated balance sheets included $6 million and $60 million of restricted cash, respectively, related to our mortgage loans. The $92 million held by the lenders of the HHV Mortgage Loan and the mortgage loan secured by the Hilton Denver City Center was released to us during the third quarter upon submission of the certificates reflecting compliance with financial ratios of these loans.

Credit Facilities

2016 Term Loan and Revolver

In December 2016, we entered into a credit agreement (“Original Credit Agreement”) with Wells Fargo Bank, National Association as administrative agent, and certain others financial institutions party thereto as lenders. The facility included a $1 billion Revolver, which was increased to $1.075 billion in September 2020, and a term loan due December 2021 ("2016 Term Loan"). In March 2020, we fully drew down our $1 billion Revolver as a precautionary measure to increase liquidity and preserve financial flexibility in connection with the economic effect of COVID-19. We subsequently fully repaid the then outstanding balance under our Revolver using proceeds from: (i) the issuance of $2.1 billion of senior notes, (ii) the sales of consolidated hotels and (iii) existing cash. We also used proceeds from the issuance of the $725 million of senior notes due 2028 (“2028 Senior Notes”) to repay all of the amounts outstanding under our 2016 Term Loan. In September 2020, we extended $901 million of the commitments under the Revolver to December 2023, and the remaining $174 million of commitments under the Revolver matured in December 2021.

In December 2022, we amended and restated the Original Credit Agreement ("Credit Agreement"). The Credit Agreement provides aggregate commitments of $950 million for the Revolver, which can be increased by up to $500 million with lender approval, and matures on December 1, 2026, with the ability to extend its maturity by one year as (i) a one-year extension or (ii)

two six-month extensions. Borrowings under the Revolver bear interest based upon the secured overnight financing rate ("SOFR") plus a credit spread adjustment of 0.1%, plus an applicable margin based on our leverage ratio. We incur an unused facility fee on the Revolver of between 0.2% and 0.3%, based on our level of usage. The Credit Agreement also contains certain financial covenants including a maximum leverage ratio, minimum fixed charge coverage ratio, maximum secured leverage ratio, maximum unsecured indebtedness to unencumbered asset value ratio and minimum unencumbered adjusted net operating income to unsecured interest coverage ratio, certain of which were adjusted to revised levels through the end of the first quarter of 2024. The Credit Agreement allows us to conduct share repurchases, subject to compliance with the financial covenants, and released all collateral securing the Revolver and Senior Notes. The Credit Agreement restricts activities of the Company, including our ability to grant liens on certain properties, mergers, affiliate transactions, asset sales and the payment of dividends and distributions (except to the extent required to maintain REIT status and certain other agreed exceptions). Additionally, the Revolver permits one or more standby letters of credit, up to a maximum aggregate outstanding balance of $50 million, to be issued on behalf of us. Any outstanding standby letters of credit reduce the available borrowings on the Revolver by a corresponding amount. As of December 31, 2022, we had approximately $4 million outstanding on a standby letter of credit. We used $50 million of the Revolver, together with cash on hand, to fully repay the $78 million balance on our 2019 Term Facility. We capitalized $9 million of issuance costs during the year ended December 31, 2022.

2019 Term Facility

In advance of the Merger, in August 2019, the Company, our Operating Company and PK Domestic entered into the 2019 Term Facility with Bank of America, N.A. as administrative agent, and certain other financial institutions party thereto as lenders. The 2019 Term Facility provided for $950 million unsecured delayed draw term loan commitments to fund the Merger. The 2019 Term Facility included a $100 million two-year delayed draw term loan tranche, which was unfunded and the commitments thereunder terminated on September 18, 2019, and a $850 million five-year delayed draw term loan tranche, which has a scheduled maturity date of August 2024. On September 18, 2019, the five-year tranche was fully drawn to fund the Merger of which $180 million was prepaid in December 2019. During the year ended December 31, 2021, we repaid $592 million of the 2019 Term Facility using proceeds from the issuance of $750 million of senior notes due 2029 ("2029 Senior Notes") and from the sales of consolidated hotels during 2021. In December 2022, we used $50 million of the Revolver, together with cash on hand, to fully repay the $78 million balance on our 2019 Term Facility.

In connection with the Merger, we assumed an interest rate swap from Chesapeake, which was designated as a cash flow hedge, to hedge the interest rate risk on a portion of the 2019 Term Facility. The interest rate swap, which matured on April 2022, required us to pay fixed interest of 1.86% per annum on a notional amount of $225 million, in exchange for floating rate interest equal to one-month LIBOR. In September 2021, following partial repayments of the 2019 Term Facility, we partially terminated the swap to reduce the notional amount to $78 million (the then outstanding balance of the 2019 Term Facility) and removed the designation of the swap as a cash flow hedge.

Senior Notes

2025 Senior Notes

In May 2020, our Operating Company, PK Domestic and PK Finance issued an aggregate of $650 million of senior notes due 2025 ("2025 Senior Notes"). We used $219 million of the net proceeds to repay a portion of the then outstanding balance under our Revolver, $69 million to partially repay the 2016 Term Loan and the remainder was used for general corporate purposes. The 2025 Senior Notes bear interest at a rate of 7.500% per annum, payable semi-annually in arrears on June 1 and December 1 of each year, beginning December 1, 2020. The 2025 Senior Notes will mature on June 1, 2025. We capitalized $13 million of issuance costs during the year ended December 31, 2020.

We may redeem the 2025 Senior Notes, in whole or in part, at the applicable redemption prices set forth in the indenture. On or after June 1, 2024, we may redeem the 2025 Senior Notes at 100% of the principal amount, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.

2028 Senior Notes

In September 2020, our Operating Company, PK Domestic LLC and the PK Finance issued an aggregate of $725 million of 2028 Senior Notes. The 2028 Senior Notes bear interest at a rate of 5.875% per annum, payable semi-annually in arrears on April 1 and October 1 of each year beginning April 1, 2021. Net proceeds were used to repay the 2016 Term Loan in full and to repay $80 million of the then outstanding balance under our Revolver. We capitalized $13 million of issuance costs during the year ended December 31, 2020.

We may redeem the 2028 Senior Notes at any time prior to October 1, 2023, in whole or in part, at a redemption price equal to 100

% of the principal amount thereof plus accrued and unpaid interest, if any, to the redemption date plus a make-whole premium. On or after October 1, 2023, we may redeem the 2028 Senior Notes, in whole or in part, at the applicable redemption prices set forth in the indenture. On or after October 1, 2025, we may redeem the 2028 Senior Notes at 100% of the principal amount, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. In addition, before October 1, 2023, we may redeem up to 40% of the 2028 Senior Notes with the net cash proceeds from certain equity offerings at a redemption price of 105.875% of the principal amount redeemed.

2029 Senior Notes

In May 2021, our Operating Company, PK Domestic and PK Finance issued an aggregate of $750 million of 2029 Senior Notes. Net proceeds were used to repay $564 million of the then outstanding balance under our Revolver and $173 million of the 2019 Term Facility. The 2029 Senior Notes bear interest at a rate of 4.875% per annum, payable semi-annually in arrears on May 15 and November 15 of each year, beginning November 15, 2021. The 2029 Senior Notes will mature on May 15, 2029. We capitalized $13 million of issuance costs during the year ended December 31, 2021.

We may redeem the 2029 Senior Notes at any time prior to May 15, 2024, in whole or in part, at a redemption price equal to 100% of the principal amount thereof plus accrued and unpaid interest, if any, to the redemption date plus a make-whole premium. On or after May 15, 2024, we may redeem the 2029 Senior Notes, in whole or in part, at the applicable redemption prices set forth in the indenture. On or after May 15, 2026, we may redeem the 2029 Senior Notes at 100% of the principal amount, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. In addition, before May 15, 2024, we may redeem up to 40% of the 2029 Senior Notes with the net cash proceeds from certain equity offerings at a redemption price of 104.875% of the principal amount redeemed.

Indentures

The 2025 Senior Notes, 2028 Senior Notes and 2029 Senior Notes (collectively, the “Senior Notes”) are guaranteed by us and by the subsidiaries of our Operating Company that also guarantee indebtedness under our credit facility. The guarantees are full and unconditional and joint and several. The Senior Notes are no longer secured following the amendment and restatement of the Original Credit Agreement in December 2022, at which time all collateral securing the Revolver and Senior Notes was released. The indentures governing the Senior Notes contain customary covenants that limit the issuers’ ability and, in certain instances, the ability of the issuers’ subsidiaries, to borrow money, create liens on assets, make distributions and pay dividends on or redeem or repurchase stock, make certain types of investments, sell stock in certain subsidiaries, enter into agreements that restrict dividends or other payments from subsidiaries, enter into transactions with affiliates, issue guarantees of indebtedness, and sell assets or merge with other companies. These covenants are subject to a number of exceptions and qualifications, including the ability to declare or pay any cash dividend or make any cash distribution to us to the extent necessary for us to fund a dividend or distribution by us that we believe is necessary to maintain our status as a REIT or to avoid payment of any tax for any calendar year that could be avoided by reason of such distribution, and the ability to make certain restricted payments not to exceed $100 million, plus 95% of our cumulative Funds From Operations (as defined in the indentures), plus the aggregate net proceeds from (i) the sale of certain equity interests in, (ii) capital contributions to, and (iii) certain convertible indebtedness of the Operating Company. In addition, the indentures require our Operating Company to maintain total unencumbered assets as of each fiscal quarter of at least 150% of total unsecured indebtedness, in each case calculated on a consolidated basis.

Debt Maturities

The contractual maturities of our debt, assuming the exercise of all extensions that are exercisable solely at our option, as of December 31, 2022 were:

Year	(in millions)
2023	$	863
2024		7
2025		657
2026		1,613
2027		30
Thereafter(1)		1,474
	$	4,644

(1) Assumes the exercise of all extensions that are exercisable solely at our option.