Hospitality company Red Lion Hotels Corporation (RLH) recently announced the extension of its credit line with Wells Fargo Bank which is a unit of Wells Fargo & Co. (WFC). The new secured facility worth $45 million will allow the company to refinance about $38 million in maturing CMBS debt and pay expenses related to the transaction. The balance will be utilized for general corporate purposes and capital expenditures.
Moreover, a $10 million two-year revolving line of credit is available under the facility. The hotelier has guaranteed 19 of its properties as security for the new agreement.
Management believes that the company’s improved balance sheet helped it to get favorable terms and conditions related to the Wells Fargo credit facility. As of Mar 31, 2013, Red Lion had $5.2 million in cash and $10.0 million on its line of credit. Also, during the first quarter of 2013, Red Lion modified its existing credit facility with Wells Fargo Bank in order to extend the maturity period.
Following first-quarter 2013, Red Lion used a portion of the proceeds from the sale of the Kalispell Center Mall to pay down $8.8 million of the existing credit facility. In fact, since Jun 2011, Red Lion reduced its debt by over $58 million and purchased $37 million of leased properties using proceeds from the sale of assets.
The latest deal ensures more flexibility for Red Lion, including no penalties for prepayment. As a matter of fact, management can tap growth opportunities both at franchised and owned hotels with the excess liquidity obtained from this facility.
Red Lion Hotels currently retains a Zacks Rank #4 (Sell). Some casino-hotel operators with a favorable outlook include Las Vegas Sands Corp. (LVS) and MGM Resorts International (MGM) both carrying a Zacks Rank #2 (Buy).
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