The Effects Of COVID-19 On Hotel Financing

The global COVID-19 pandemic has particularly affected the hospitality industry. To address some of the issues arising from the COVID-19 pandemic, hospitality industry participants have been forced to revisit the terms of their existing financing, brand management and franchise agreements and to engage in discussions with other stakeholders to build a path forward.

1. Many hotels have faced closure due to the pandemic. For hotel properties that are currently financed, what are some of the key issues being addressed by borrowers and lenders under hotel credit agreements?

Borrowers will principally be focused on obtaining payment deferrals—of principal, at minimum—or other liquidity relief, but borrowers should also review the terms of their credit agreements to consider whether there are any existing covenants in respect of which they should seek waivers from their lenders. Does the credit agreement include: (i) continuous operating covenants; (ii) financial