Debt

12 Months Ended

Dec. 31, 2019

Debt Disclosure [Abstract]

Debt

Note 7: Debt

Debt balances and associated interest rates as of December 31, 2019 were:

			Principal balance as of
	Interest Rate at December 31, 2019	Maturity Date	December 31, 2019			December 31, 2018
			(in millions)
SF CMBS Loan	4.11%	November 2023	$	725		$	725
HHV CMBS Loan	4.20%	November 2026		1,275			1,275
Mortgage loans(1)	Average rate of 4.26%	2020 to 2026(2)		515			207
2016 Term Loan	L + 1.55%	December 2021		700			750
2019 Term Facility	L + 1.50%	September 2024		670			—
Revolver(3)	L + 1.60%	December 2021(2)		—			—
Capital lease obligations	3.07%	2021 to 2022		1			1
				3,886			2,958
Add: unamortized premium				3			—
Less: unamortized deferred financing costs and    discount				(18	)		(10	)
			$	3,871		$	2,948

^{(1) Includes $308 million of mortgage loans assumed in connection with the Merger, all of which require payments of principal and interest on a      monthly basis.}

^{(2) Assumes the exercise of all extensions that are exercisable solely at our option.}

^{(3) $1 billion available.}

CMBS and 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 CMBS Loan”) and a $1.275 billion CMBS loan secured by the Hilton Hawaiian Village (“HHV CMBS Loan”). Both the SF CMBS Loan and the HHV CMBS Loan bear interest at a fixed-rate and require interest-only payments through their respective maturity dates. At any time after the permitted release date of May 1, 2019, the SF CMBS Loan and HHV CMBS 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.  Our mortgage loans associated with our VIEs require interest-only loan payments through their respective maturity dates and the mortgage loans associated with the Merger require payments of principal and interest on a monthly basis.

We are required to deposit with lenders certain cash reserves for restricted uses. As of December 31, 2019 and 2018, our consolidated balance sheets included $13 million and $15 million of restricted cash, respectively, related to our CMBS loans and mortgage loans.

Credit Facilities

2016 Term Loan and Revolver

In December 2016, we entered into a credit agreement (“Credit Agreement”) with Wells Fargo Bank, National Association as administrative agent, and certain others financial institutions party thereto as lenders. The facility includes a $1 billion revolving credit facility (“Revolver”), which has a scheduled maturity date of December 24, 2020 with two, six-month extension options if certain conditions are satisfied, and a $750 million term loan (“2016 Term Loan”). The Credit Agreement includes the option to increase the size of the Revolver and enter into additional incremental term loan credit facilities, subject to certain limitations, in an aggregate commitment or principal amount not to exceed $500 million for all such increases. In December 2019, we prepaid $50 million of the 2016 Term Loan.

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.

Revolver and 2016 Term Loan borrowings bear interest at variable rates at our option, based upon either a base rate or LIBOR rate, 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 contains certain financial covenants relating to our maximum leverage ratio, minimum fixed charge coverage ratio, maximum secured leverage ratio, maximum unsecured indebtedness to unencumbered asset value and minimum unencumbered adjusted net operating income to unsecured interest coverage. If an event of default exists, we are not permitted to make distributions to shareholders, other than those required to qualify for and maintain REIT status.

2019 Term Facility

In advance of the Merger, in August 2019, the Company, our Operating Company and PK Domestic entered into a delayed draw term loan agreement (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. The 2019 Term Facility agreement includes the option to increase the size of the 2019 Term Facility and enter into additional incremental term loan credit facilities, subject to certain limitations and obtaining additional commitments, in an aggregate amount not to exceed $400 million for all such increases.

Borrowings from the 2019 Term Facility bear interest at variable rates at our option, based upon either a base rate or LIBOR rate, plus an applicable margin based on our leverage ratio. Beginning in August 2019, we accrued an unused commitment fee equal to 0.25% per annum of the undrawn portion of the 2019 Term Facility, which was paid on September 18, 2019 when the 2019 Term Facility was fully drawn. Additionally, we incurred upfront financing fees of $9 million associated with the 2019 Term Facility, of which $3 million was expensed in connection with the terminated commitments and the $180 million prepayment in December 2019.

The 2019 Term Facility agreement contains certain financial covenants relating to our maximum leverage ratio, minimum fixed charge coverage ratio, maximum secured leverage ratio, maximum unsecured indebtedness to unencumbered asset value and minimum unencumbered adjusted net operating income to unsecured interest coverage. If an event of default exists, we generally are not permitted to make distributions to stockholders, other than those required to qualify for and maintain REIT status and certain other limited exceptions.

In connection with the Merger, we assumed an interest rate swap from Chesapeake, which is designated as a cash flow hedge, to hedge the interest rate risk on a portion of the 2019 Term Facility.  The interest rate swap requires us to pay fixed interest of 1.86% per annum maturing on April 21, 2022 on a notional amount of $225 million, in exchange for floating rate interest equal to one-month LIBOR.

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, 2019 were:

Year	(in millions)
2020	$	21
2021		709
2022		97
2023		827
2024		676
Thereafter(1)		1,556
	$	3,886

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