MHI Hospitality Corp., (MDH) the Williamsburg, Virginia-based hotel-investment company, said its lenders agreed to credit line amendments that increase the interest rate and ease the leverage ratio.
Under the third amendment with Branch Banking & Trust Co. on Feb. 19, the spread for MHI’s variable Libor-based interest rate was increased 1.125 percentage points to a range of 2.75 percent to 3.25 percent, the company said in a filing today with the U.S. Securities and Exchange Commission.
The amendment to a credit line dated May 8, 2006, also increases MHI’s total maximum permitted leverage to 62.5 percent from 55 percent of total asset value, according to the filing. The agreement adjusts the valuation for properties under renovation and sets new limits on cash the company may pay to shareholders to maintain its real estate investment status.
The company will need a minimum of $10 million in cash or credit to pay a dividend greater than 90 percent of taxable income to maintain its real estate investment status, Chief Financial Officer William Zaiser said in an interview. Credit and cash exceeded $10 million at year-end and is currently about $6 million, Zaiser said.
MHI has about $73.2 million outstanding on its $80 million revolving credit line, the company said in a statement.
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