Debt

9 Months Ended

Sep. 30, 2019

Debt

Debt

7. DEBT:

The Company’s debt and finance lease obligations at September 30, 2019 and December 31, 2018 consisted of (in thousands):

	September 30,		December 31,
	2019		2018
$700M Revolving Credit Facility, interest at LIBOR plus 1.80%, maturing May 23, 2021, less unamortized deferred financing costs of $4,570 and $6,542	$	218,430	$	518,458
$200M Term Loan A, interest at LIBOR plus 1.75%, maturing May 23, 2022, less unamortized deferred financing costs of $960 and $1,220		199,040		198,780
$500M Term Loan B, interest at LIBOR plus 2.00%, maturing May 11, 2024, less unamortized deferred financing costs of $4,637 and $5,307		482,863		485,943
$350M Senior Notes, interest at 5.0%, original maturity April 15, 2021, less unamortized deferred financing costs of $0 and $2,385		—		347,615
$400M Senior Notes, interest at 5.0%, maturing April 15, 2023, less unamortized deferred financing costs of $3,441 and $4,097		396,559		395,903
$500M Senior Notes, interest at 4.75%, maturing October 15, 2027, less unamortized deferred financing costs of $8,385 and $0		491,615		—
$800M Term Loan (Gaylord Rockies joint venture), interest at LIBOR plus 2.50%, maturing July 2, 2023, less unamortized deferred financing costs of $8,546 and $0		791,454		—
$500M Construction Loan (Gaylord Rockies joint venture), original maturity December 18, 2019, less unamortized deferred financing costs of $0 and $1,807		—		457,090
$39M Mezzanine Loan (Gaylord Rockies joint venture), original maturity December 18, 2019, less unamortized deferred financing costs of $0 and $227		—		37,488
Finance lease obligations		1,351		618
Total debt	$	2,581,312	$	2,441,895

Amounts due within one year consist of the amortization payments for the $500 million term loan B of 1.0% of the original principal balance, as described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

At September 30, 2019, the Company was in compliance with all of its covenants related to its outstanding debt.

See Note 17, “Subsequent Events,” for discussion of October 2019 refinancing of the Company’s $700 million revolving credit facility and $200 million term loan A.

$500 Million 4.75% Senior Notes Due 2027

In September 2019, the Operating Partnership and RHP Finance Corporation, a Delaware corporation and wholly-owned subsidiary of the Operating Partnership (“Finco”), completed the private placement of $500.0 million in aggregate principal amount of senior notes due 2027 (the “$500 Million 4.75% Senior Notes”), which are guaranteed by the Company and its subsidiaries that guarantee the Credit Agreement. The $500 Million 4.75% Senior Notes and guarantees were issued pursuant to an indenture by and among the issuing subsidiaries and the guarantors and U.S. Bank National Association as trustee. The $500 Million 4.75% Senior Notes have a maturity date of October 15, 2027 and bear interest at 4.75% per annum, payable semi-annually in cash in arrears on April 15 and October 15 of each year, beginning on April 15, 2020. The $500 Million 4.75% Senior Notes are general unsecured and unsubordinated obligations of the issuing subsidiaries and rank equal in right of payment with such subsidiaries’ existing and future senior unsecured indebtedness and senior in right of payment to future subordinated indebtedness, if any. The $500 Million 4.75% Senior Notes are effectively subordinated to the issuing subsidiaries’ secured indebtedness to the extent of the value of the assets securing such indebtedness. The guarantees rank equally in right of payment with the applicable guarantor’s existing and future senior unsecured indebtedness and senior in right of payment to any future subordinated indebtedness of such guarantor. The $500 Million 4.75% Senior Notes are effectively subordinated to any secured indebtedness of any guarantor to the extent of the value of the assets securing such indebtedness and structurally subordinated to all indebtedness and other obligations of the Operating Partnership’s subsidiaries that do not guarantee the $500 Million 4.75% Senior Notes.

The $500 Million 4.75% Senior Notes are redeemable before October 15, 2022, in whole or in part, at 100.00% of the principal amount thereof, plus accrued and unpaid interest thereon to, but not including, the redemption date plus a make-whole redemption premium. The $500 Million 4.75% Senior Notes will be redeemable, in whole or in part, at any time on or after October 15, 2022 at a redemption price expressed as a percentage of the principal amount thereof, which percentage is 103.563%, 102.375%, 101.188%, and 100.00% beginning on October 15 of 2022, 2023, 2024, and 2025, respectively, plus accrued and unpaid interest thereon to, but not including, the redemption date.

In connection with the issuance of the $500 Million 4.75% Senior Notes, the Company entered into a registration rights agreement that requires it to complete a registered offer to exchange the $500 Million 4.75% Senior Notes for registered notes with substantially identical terms as the $500 Million 4.75% Senior Notes on or before September 18, 2020.

The net proceeds from the issuance of the $500 Million 4.75% Senior Notes totaled approximately $493 million, after deducting the initial purchasers’ discounts, commissions and offering expenses. The Company used substantially all of these proceeds to repurchase a portion of the $350 Million 5% Senior Notes due 2021 (the “$350 Million 5% Senior Notes”) validly tendered and accepted for purchase pursuant to the Company’s previously announced cash tender offer, redeem the remaining portion of the $350 Million 5% Senior Notes, as discussed below, and to repay a portion of the amounts outstanding under the Company’s revolving credit facility. See Note 17, “Subsequent Events,” for discussion regarding additional notes issued pursuant to the indenture governing the $500 Million 4.75% Senior Notes in October 2019.

$350 Million 5% Senior Notes Due 2021

In September 2019, the Company commenced a cash tender offer for any and all outstanding $350 Million 5% Senior Notes at a redemption price of $1,002.50 per $1,000 principal amount. Pursuant to the tender offer, $197.5 million aggregate principal amount of the $350 Million 5% Senior Notes were validly tendered. As a result of the Company’s purchase of tendered $350 Million 5% Senior Notes, the Company recognized a loss on extinguishment of debt of $0.5 million in the three months and nine months ended September 30, 2019. The Company used a portion of the proceeds from the issuance of the $500 Million 4.75% Senior Notes to fund the tender offer.

In accordance with the indenture governing the $350 Million 5% Senior Notes, subsequent to expiration of the tender offer, in September 2019 the Company gave irrevocable notice of the redemption of all remaining $350 Million 5% Senior Notes not tendered in the tender offer and irrevocably deposited with the trustee for the $350 Million 5% Senior Notes an amount sufficient to pay the redemption price of the $350 Million 5% Senior Notes called for redemption at that date, including interest. Accordingly, the $350 Million 5% Senior Notes are no longer reflected in the accompanying condensed consolidated balance sheet at September 30, 2019. The Company used a portion of the proceeds from the issuance of the $500 Million 4.75% Senior Notes to fund the redemption.

As a result of the refinancing of the $350 Million 5% Senior Notes, the Company wrote off $1.7 million of unamortized deferred financing costs, which are recorded as interest expense in the accompanying condensed consolidated financial statements for the three and nine months ended September 30, 2019.

$800 Million Term Loan (Gaylord Rockies Joint Venture)

On July 2, 2019, Aurora Convention Center Hotel, LLC and Aurora Convention Center Hotel Lessee, LLC, subsidiaries of the entities comprising the Gaylord Rockies joint venture, entered into a Second Amended and Restated Loan Agreement (the “Gaylord Rockies Loan”) with Wells Fargo Bank, National Association, as administrative agent, which refinanced the Gaylord Rockies joint venture’s existing $500 million construction loan and $39 million mezzanine loan, which were scheduled to mature in December 2019. The Gaylord Rockies Loan consists of an $800.0 million secured term loan facility and also includes the option for an additional $80.0 million of borrowing capacity should the Gaylord Rockies joint venture decide to pursue a future expansion of Gaylord Rockies. The Gaylord Rockies Loan matures July 2, 2023 with three, one-year extension options, subject to certain requirements in the Gaylord Rockies Loan, and bears interest at LIBOR plus 2.50%. Simultaneous with closing, the Gaylord Rockies joint venture entered into an interest rate swap to fix the LIBOR portion of the interest rate at 1.65% for the first three years of the loan. The Company has designated this interest rate swap as an effective cash flow hedge.

The proceeds from the Gaylord Rockies Loan were used by the Gaylord Rockies joint venture to repay the previously outstanding $500 million construction loan and $39 million mezzanine loan, and, after payment of expenses, the Gaylord Rockies joint venture distributed the excess proceeds to the owners of the Gaylord Rockies joint venture pro rata in proportion to their interests therein. The noncontrolling interest owners received a distribution of approximately $95 million, and the Company received a distribution of approximately $153 million, which was used to repay a portion of the outstanding indebtedness under the Company’s $700 million revolving credit facility.

The Gaylord Rockies Loan is secured by a deed of trust lien on the Gaylord Rockies real estate and related assets. The Company and an affiliate of RIDA each entered into limited repayment and carry guaranties that, in the aggregate, guarantee repayment of 10% of the principal debt, together with interest and operating expenses, which are to be released once the Gaylord Rockies joint venture achieves a certain debt service coverage threshold as defined in the Gaylord Rockies Loan. Generally, the Gaylord Rockies Loan is non-recourse to the Company, subject to (i) those limited guaranties, (ii) a completion guaranty in the event the expansion is pursued and (iii) customary non-recourse carve-outs.

As a result of the refinancing, the Gaylord Rockies joint venture wrote off $1.1 million of unamortized deferred financing costs, which are recorded as interest expense in the accompanying condensed consolidated financial statements for the three and nine months ended September 30, 2019.

Interest Rate Derivatives

The Company may enter into interest rate swap agreements to hedge against interest rate fluctuations. The Gaylord Rockies joint venture has entered into an interest rate swap to manage interest rate risk associated with the Gaylord Rockies Loan. The Gaylord Rockies joint venture has designated this swap as a cash flow hedge whereby the joint venture receives variable-rate amounts in exchange for fixed-rate payments over the life of the agreement without exchange of the underlying principal amount. Neither the Company nor the Gaylord Rockies joint venture use derivatives for trading or speculative purposes and currently do not hold any derivatives that are not designated as hedges.

For derivatives designated as and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in accumulated other comprehensive loss and subsequently reclassified to interest expense in the same period during which the hedged transaction affects earnings. These amounts reported in accumulated other comprehensive loss will be reclassified to interest expense as interest payments are made on the related variable-rate debt. The Company estimates that an immaterial amount will be reclassified from accumulated other comprehensive loss to interest expense in the next twelve months.

At September 30, 2019, the Gaylord Rockies joint venture had one outstanding interest rate swap in the notional amount of $800.0 million that matures in August 2022.

The Company had no derivative assets at September 30, 2019 or December 31, 2018. The fair value of the Company’s derivative liabilities, as well as their classification on the accompanying condensed consolidated balance sheets, at September 30, 2019 and December 31, 2018 is as follows (in thousands):

	Derivative Liabilities
	Balance Sheet	September 30,		December 31,
	Location	2019		2018
Derivatives designated as hedging instruments:
Interest rate swap	Other liabilities	$	4,986	$	—
Total derivatives		$	4,986	$	—

The effect of the Company’s derivative financial instruments on the accompanying condensed consolidated statements of operations for the respective periods is as follows (in thousands):

	Amount of Gain (Loss)					Amount of Gain (Loss)
	Recognized in OCI					Reclassified from Accumulated
	on Derivative				Location of Gain (Loss)	OCI into Income (Expense)
	Three Months Ended				Reclassified from	Three Months Ended
	September 30,				Accumulated OCI	September 30,
	2019		2018		into Income (Expense)	2019		2018
Derivatives in Cash Flow Hedging Relationships:
Interest rate swap	$	(3,789)	$	—	Interest expense	$	1,197	$	—
Total derivatives	$	(3,789)	$	—		$	1,197	$	—

	Amount of Gain (Loss)					Amount of Gain (Loss)
	Recognized in OCI on					Reclassified from Accumulated
	Derivative				Location of Gain (Loss)	OCI into Income (Expense)
	Nine Months Ended				Reclassified from	Nine Months Ended
	September 30,				Accumulated OCI	September 30,
	2019		2018		into Income (Expense)	2019		2018
Derivatives in Cash Flow Hedging Relationships:
Interest rate swap	$	(3,789)	$	—	Interest expense	$	1,197	$	—
Total derivatives	$	(3,789)	$	—		$	1,197	$	—

Reclassifications from accumulated other comprehensive loss for interest rate swaps are shown in the table above and included in interest expense. Total consolidated interest expense for the three months ended September 30, 2019 and 2018 was $35.3 million and $19.2 million, respectively, and for the nine months ended September 30, 2019 and 2018 was $100.8 million and $55.6 million, respectively.

At September 30, 2019, the fair value of derivatives in a net liability position including accrued interest but excluding any adjustment for nonperformance risk related to these agreements was $5.1 million. As of September 30, 2019, the Company has not posted any collateral related to these agreements and was not in breach of any agreement provisions. If the Company had breached any of these provisions, it could have been required to settle its obligations under the agreements at the aggregate termination value of $5.1 million. In addition, the Company has an agreement with its derivative counterparty that contains a provision whereby the Company could be declared in default on its derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to the Company’s default on the indebtedness.

See Note 17, “Subsequent Events,” for discussion of interest rate swaps entered into in October 2019 related to the Company’s $500 million term loan B.