Subsequent Events

3 Months Ended

Mar. 31, 2020

Subsequent Events [Abstract]

Subsequent Events

Subsequent Events

On March 12, 2020, our board of directors authorized, and we declared, a cash dividend of $0.20 per share of common stock with respect to the first quarter of 2020. The first quarter dividend was paid on April 15, 2020 to stockholders of record as of March 31, 2020. In April 2020, our board of directors suspended the common stock dividend for the second quarter of 2020 and for the remainder of the year. Our board of directors will reassess at the end of the year any additional common dividend amount that may be declared and paid for 2020 in addition to the dividend we paid with respect to the first quarter of 2020.

Subsequent to March 31, 2020, we sold, in separate transactions, three operating hotels for gross sales price of $13 million, recognizing an estimated gain on sales of approximately $2 million. As of March 31, 2020, none of these hotels were classified as assets held for sale because they did not meet the accounting criteria established for such classification. We used $6 million of the net sales proceeds to pay down the principal of the CMBS Facility.

On May 19, 2020, CorePoint OP, the CorePoint Revolver Borrower and certain of the CorePoint Revolver Borrower’s subsidiaries entered into the Revolver Credit Agreement Amendment. After giving effect to the Revolver Credit Agreement Amendment, the commitments under our Revolving Facility are reduced to $110 million, any existing or new letters of credit are required to be cash collateralized at 102% and the CorePoint Revolver Borrower is required to prepay outstanding revolving loans in an amount equal to $5 million, on a monthly basis, for a period of five months commencing on August 15, 2020 (the “Scheduled Payments”). Additionally, the interest rate margin under our Revolving Facility increased by 0.50% per annum to be, at the option of the CorePoint Revolver Borrower, either at a base rate plus a margin of 4.00% per annum or LIBOR plus a margin of 5.00% per annum and the commitment fee increased from 0.50% per annum to 0.75% per annum payable at the end of each quarter. The

Revolver Credit Agreement Amendment extended the maturity of our Revolving Facility to May 31, 2021, which maturity may be accelerated if our CMBS Facility is not extended to a date no earlier than such date on or prior to its stated maturity on June 9, 2020.

The Revolver Credit Agreement Amendment further restricts our ability to incur certain additional debt and liens and make certain investments and restricted payments, such as paying dividends on or repurchasing common stock, but provides for the ability to incur debt consisting of certain government loan programs and make restricted payments in order for CorePoint Lodging Inc. to maintain its status as a REIT. We may also pay dividends to stockholders if required to maintain our status as a REIT, where such payment must be in the form of a stock dividend to the extent permitted by IRS regulations and the Code. Additionally, the total net leverage ratio and interest coverage ratio financial covenants were eliminated through the maturity date of our Revolving Facility. In addition to the extension of the maturity of the Revolving Facility granted by Revolving Facility lenders, we sought the elimination of such covenants in order to avoid the possibility of breaching such covenants, which we believed was otherwise likely based on our projections. The Revolver Credit Agreement Amendment requires that we maintain a minimum of $60 million of liquidity (exclusive of certain restricted cash), at all times. The minimum liquidity amount is reduced on a dollar-for-dollar basis in respect of 50% of any amounts utilized to repay our Revolving Facility and permanently reduce the commitments thereunder (other than in respect of the Scheduled Payments). Further, due to the disruptions in our operations from the COVID-19 pandemic, our Revolving Facility lenders currently control the disbursement of our hotel operating cash receipts (referred to as a “cash trap”). We will be subject to a cash trap until we come into compliance with the debt yield threshold under the Revolving Facility, which we may be unable to do during the remainder of the term of the Revolving Facility. In consideration of the lenders under our Revolving Facility consenting to the Revolver Credit Agreement Amendment, each of CorePoint Lodging Inc. and CorePoint OP GP L.L.C. agreed to provide a guarantee of the obligations under the Revolving Facility and pledge the equity of CorePoint OP owned by it as security for such obligations.