[slide 1]
Legal Structure Summary — Prepared by Calderwood & Harkness LLP
Verimark Hospitality Group Inc. — $700,000,000 Senior Secured Term Loan B Refinancing
Legal Summary for Lender Presentation — Bank Meetings: June 13–17, 2022
Prepared by Calderwood & Harkness LLP, Borrower's Counsel
Date: June 10, 2022
CONFIDENTIAL — Not for Distribution
[slide 2]
Transaction Overview
Borrower: Verimark Hospitality Group Inc. (NYSE: VMRK), a Delaware corporation headquartered in Boca Raton, FL
Facility: $700,000,000 Senior Secured Term Loan B
Administrative Agent, Collateral Agent, Lead Arranger & Bookrunner: Crescent Harbor Bank, N.A.
Purpose: (i) Refinance in full the existing $625M TLB (Greystone Federal Credit Corp. as agent; originated Feb. 2020); (ii) fund up to $75M for permitted acquisitions and general corporate purposes
Total payoff of existing Greystone facility: ~$627,916,667 ($621.875M principal, ~$2.917M accrued interest, $3.125M prepayment premium)
Net proceeds to VHG after payoff, OID, advisory fee, and estimated closing costs: ~$60,483,333
Structure: Simultaneous sign-and-close anticipated July 2022
Governing Law: New York
[slide 3]
Key Economic Terms
Applicable Margin: Adjusted Term SOFR + 375 bps (50 bps reduction from existing LIBOR + 425 bps facility)
SOFR Floor: 0.50%
SOFR Credit Spread Adjustment: +0.10% (1-month), +0.15% (3-month), +0.25% (6-month)
Benchmark: Adjusted Term SOFR (CME Term SOFR + CSA); hardwired fallback to Daily Simple SOFR consistent with ARRC recommendations
OID: 1.00% of par ($7,000,000); net funding of $693,000,000
Maturity: 7 years from closing (anticipated July 21, 2029)
Amortization: 1.00% per annum ($7M/year; $1.75M/quarter); balloon payment at maturity of $651M
Default Rate: Applicable rate + 200 bps
Annual estimated interest savings vs. existing facility: approximately $3,500,000
[slide 4]
Borrower and Guarantor Structure
Borrower: Verimark Hospitality Group Inc. (Delaware corp.; NYSE: VMRK; EIN 82-3741956)
Guarantors (all material domestic subsidiaries):
— Verimark Resort Properties LLC (DE LLC) — owns 42 of 74 hotel properties; appraised at ~$2.18B
— VHG Management Services Inc. (DE corp.) — hotel management subsidiary
— Verimark Convention Holdings LLC (DE LLC) — convention center and event space subsidiary
— Palmetto Beachfront Hotels LLC (FL LLC) — 12 Florida coastal resort properties
— Cascadia Hospitality Corp. (DE corp.) — 8 Pacific Northwest hotel properties
Guarantee: Unconditional guarantee by each Guarantor of all Borrower obligations under the Credit Agreement and related loan documents
[slide 5]
Collateral Package
First-priority lien on substantially all assets of VHG and each Guarantor
Real Property: Fee simple and leasehold interests in 42 hotel properties (Verimark Resort Properties LLC) — appraised at ~$2.18B (~3.1x coverage on TLB)
Equity Interests: 100% of equity in each direct domestic subsidiary; 65% of equity in any first-tier foreign subsidiaries
Personal Property: All accounts, inventory, equipment, intellectual property, and general intangibles
Mortgages required across 12 states: FL (12), NY (6), CA (5), TX (4), GA (3), CO (3), AZ (2), IL (2), WA (2), OR (1), NV (1), VA (1)
Title insurance: Mortgagee policies and endorsements from Continental Fidelity Title Company
UCC-1 filings: Delaware Secretary of State and Florida Secured Transaction Registry
IP filings: USPTO and U.S. Copyright Office
[slide 6]
Intercreditor Arrangement — Pari Passu First Lien
The $700M TLB shares first-lien collateral on a pari passu basis with VHG's existing $400M Senior Secured Revolving Credit Facility
RCF Agent: Crescent Harbor Bank, N.A. (same entity serves as TLB Agent and RCF Agent)
RCF is undrawn at closing; excluded from leverage calculations when undrawn
Governed by an Amended and Restated Intercreditor Agreement dated as of the closing date
VHG's $245M Senior Unsecured Notes (due 2028; Atlantic Standard Trust Company as indenture trustee) are structurally subordinated — unsecured and not party to the intercreditor agreement
[slide 7]
Financial Covenant — Springing Leverage Test
Covenant: Maximum Total Net Leverage Ratio of 4.5x
Testing: Quarterly, on a trailing four-quarter (LTM) basis
Springing trigger: Tested only when aggregate revolving credit exposure exceeds 35% of total revolving commitments (i.e., >$140M drawn on the $400M RCF)
Pro forma Total Net Leverage at closing: 2.52x
— Net funded debt at closing: $858M ($700M TLB + $245M unsecured notes − $87M unrestricted cash)
— LTM Adjusted EBITDA: $341M (FY2021); $858M ÷ $341M = 2.52x — significant headroom to 4.5x maximum
No minimum interest coverage ratio covenant
[slide 8]
Most Favored Nation (MFN) Provision
Applicable to any incremental term loans incurred within 18 months of closing (July 21, 2022 through January 21, 2024)
MFN Threshold: 50 basis points
Mechanic: If incremental term loan effective yield exceeds initial TLB yield by >50 bps, initial TLB margin is increased to within 50 bps of incremental yield
MFN Sunset Date: January 21, 2024 (18 months post-closing)
After the sunset date, VHG may incur incremental term loans at any yield without adjustment to initial TLB margin
Yield calculation includes applicable margin, OID (annualized over deemed 4-year life), SOFR floor benefit, and upfront fees
[slide 9]
Repricing Protection (Soft Call)
Repricing Protection Period: 6 months from closing (July 21, 2022 through January 21, 2023)
Premium: 1.00% of the principal amount prepaid or repriced
Dollar amount on full prepayment: $700,000,000 × 1.00% = $7,000,000
Trigger: Applies if TLB is (a) refinanced by a new term loan at a lower effective yield, or (b) amended to reduce the applicable margin, within the 6-month window
After January 21, 2023: TLB may be prepaid or repriced at par without premium
Voluntary prepayment otherwise permitted at any time without premium (after soft call sunset)
[slide 10]
Incremental Facility Provisions
VHG may incur incremental term loans subject to satisfaction of conditions including:
— Pro forma compliance with 4.5x Maximum Total Net Leverage Ratio (or, if for a permitted acquisition, leverage not exceeding closing date leverage)
— No default or event of default
— Same collateral and guarantor package (pari passu with initial TLB)
Subject to the MFN provision during the 18-month sunset period (through January 21, 2024)
Incremental facility may be structured as additional term loans or incremental revolving commitments
MFN and incremental provisions were key negotiation points reflected in final Credit Agreement
[slide 11]
SOFR Transition — Benchmark Mechanics
Primary benchmark: Adjusted Term SOFR (CME Term SOFR + credit spread adjustment)
Credit Spread Adjustments: +0.10% (1-month), +0.15% (3-month), +0.25% (6-month)
SOFR Floor: 0.50%
Benchmark Replacement: Hardwired fallback language consistent with ARRC recommendations
Fallback waterfall: (1) Term SOFR → (2) Daily Simple SOFR → (3) successor rate selected by Administrative Agent
Existing Greystone TLB was LIBOR-based; new facility fully transitions to SOFR
Illustrative all-in rate at anticipated closing: 1-month Term SOFR (~2.29%) + 10 bps CSA + 375 bps = ~6.14%
[slide 12]
Syndicate Composition
Total facility: $700,000,000 fully committed
Crescent Harbor Bank, N.A. (Agent, retained): $50,000,000
Ridgeline Capital Partners, LP: $125,000,000
Beacon Atlantic Credit Fund III: $100,000,000
Tidewater Institutional Investors, Inc.: $75,000,000
Ironbridge Loan Management LLC: $100,000,000
Northway Savings Bank: $75,000,000
Copperleaf Asset Management, LP: $100,000,000
Harborview Mutual Life Insurance Company: $75,000,000
Diversified syndicate: CLO funds, credit funds, insurance companies, and a regional bank
[slide 13]
Conditions Precedent to Closing
Execution of Credit Agreement, Guarantee Agreement, Pledge and Security Agreement, and Intercreditor Agreement
Delivery of board resolutions, secretary's certificates, incumbency certificates, and good standing certificates (DE, FL)
Solvency certificate (executed by CFO) and officer's closing certificate (reps, no defaults, no MAC)
Legal opinions from Calderwood & Harkness LLP covering due organization, authorization, enforceability, no conflicts
Perfection of security interests: UCC-1 filings (DE and FL); IP filings (USPTO, Copyright Office)
Payoff of existing $625M Greystone TLB in full (~$627,916,667)
Delivery of payoff letter and lien release authorization from Greystone Federal Credit Corp.
Receipt of satisfactory lien searches (UCC, tax lien, judgment, litigation — DE, FL, NY, CA)
KYC / AML compliance documentation
Post-closing: Mortgages, title policies, surveys, and flood certifications due within 15 days of closing
[slide 14]
Key Dates and Timeline
VHG Board authorization: May 12, 2022
Commitment letter executed: May 27, 2022
Syndication launch: June 6, 2022
Lender presentations / bank meetings: June 13–17, 2022
Final syndication allocations: June 30, 2022
Anticipated signing and closing (simultaneous): July 2022
Post-closing deliverables deadline (mortgages, title): 15 days post-closing
Repricing protection (soft call) sunset: 6 months post-closing (anticipated January 2023)
MFN sunset: 18 months post-closing (anticipated January 2024)
First quarterly amortization payment: 3 months post-closing ($1,750,000)
Maturity: July 2029 (7-year tenor)
[slide 15]
Credit Ratings
Kellaway Ratings Group (KRG): Corporate family rating BB-; Term Loan B rating B+
Pinnacle Credit Services (PCS): Corporate family rating Ba3; Term Loan B rating B1
Stable outlooks from both rating agencies
Ratings reflect VHG's diversified 74-property portfolio, strong Adjusted EBITDA of $341M, and manageable leverage profile (2.52x pro forma)
[slide 16]
Counsel and Advisors
Borrower's Counsel: Calderwood & Harkness LLP (Ian Blackwood, Responsible Partner; Sophie Tremblay, Lead Associate)
Agent's / Lenders' Counsel: Whitfield Gage & Partridge LLP (Harrison Whitfield III, Lead Partner; Megan Yeung, Lead Associate)
Financial Advisor to Borrower: Meridian Strauss Advisory LLC (Elise Cavanaugh, Managing Director)
Auditor: Clearmont & Wharton LLP (Ronald Ashby, CPA, Engagement Partner)
Title Insurer: Continental Fidelity Title Company
Existing Agent (Payoff): Greystone Federal Credit Corp. (Marion Stillwell, VP Agency Services)
[slide 17]
Contact Information
Crescent Harbor Bank, N.A. — Ted Marchetti, Managing Director, Leveraged Finance (600 Lexington Avenue, 34th Floor, New York, NY 10022)
Crescent Harbor Bank, N.A. — Anika Holm, Director, Loan Syndications
Whitfield Gage & Partridge LLP — Harrison Whitfield III (383 Madison Avenue, 28th Floor, New York, NY 10179)
Calderwood & Harkness LLP — Ian Blackwood (One Liberty Plaza, 52nd Floor, New York, NY 10006)
Verimark Hospitality Group Inc. — Priya Narayanan, General Counsel; Glenn Fischbach, Treasurer (8200 West Palmetto Park Road, Suite 1500, Boca Raton, FL 33433)