La Quinta Intermediate Holdings LLC proposed the rate it will pay on a $2.1 billion term loan to refinance commercial mortgage-backed securities before the Blackstone Group LP-lodging chain’s initial public offering next month, according to a person with knowledge of the deal.
The seven-year debt may pay interest at 3 percentage points to 3.25 percentage points more than the London interbank offered rate, with a 1 percent minimum, said the person, who asked not to be identified without authorization to speak publicly.
The hotel chain filed to raise $100 million in an IPO in the U.S. on Feb. 10. Another Blackstone hotel unit, McLean, Virginia-based Hilton Worldwide Holdings Inc., refinanced about $13 billion of debt before its December IPO. The offering raised $2.71 billion, a record for the lodging industry.
While the spread may fall 0.46 percentage point to 0.71 percentage point below the average for such loans, Hilton refinanced a $7.6 billion term loan in October at a spread of 2.75 percentage points more than Libor, according to data compiled by Bloomberg. The average loan sold to institutional investors pays a spread of 3.71 percentage points, according to Standard & Poor’s Capital IQ Leveraged Commentary & Data.
La Quinta operates and provides franchise services to more than 800 hotels in the U.S., Canada and Mexico under La Quinta Inns and La Quinta Inns & Suites brands, according to the Dallas-based company’s website.
Lenders are offered the loan at 99.5 cents on the dollar and will receive six months of call protection at 101 cents, meaning La Quinta would have to pay a one-cent premium in the first six months to reprice the debt, the person said.
JPMorgan Chase & Co. is arranging the financing.