Service Properties Trust Prices $610.2 Million Asset-backed Securitization at 5.60% That Matures in February 2028

Service Properties Trust (Nasdaq: SVC) today announced that its subsidiary, SVC ABS LLC, has priced $610.2 million in principal amount of net lease mortgage notes in a transaction exempt from registration from the Securities Act of 1933, as amended, or the Securities Act, and sold to Qualified Institutional Buyers as defined in Rule 144A under the Securities Act and in offshore transactions to non-U.S. persons outside the U.S. in accordance with Regulation S under the Securities Act. This transaction is expected to close on February 10, 2023, subject to the satisfaction of customary closing conditions. The notes will be issued in three classes to institutional buyers in the following principal amounts, and are expected to be rated by Standard & Poor’s Ratings Services as follows:

• Class A: $305.0 million of 5.15% of AAA rated notes
• Class B: $173.0 million of 5.55% of AA rated notes
• Class C: $132.2 million of 6.70% of A rated notes

The weighted average coupon of the three classes is 5.60%. The Class A and Class B notes will require monthly principal repayments at an annualized rate of 0.50% and 0.25% of the balance outstanding, respectively, and the Class C notes will require interest payments only. The notes are expected to mature in February 2028 and SVC may redeem the notes at par beginning in February 2026. The notes are non-recourse and are secured by the assets of SVC ABS LLC, which include 308 net lease retail properties with annual minimum rents of $65.3 million and an appraised value of approximately $1.0 billion. The net proceeds from this transaction, after initial purchaser discounts and offering costs, are expected to be approximately $560.0 million and will be used for the repayment of outstanding debt and general corporate purposes.

SVC has also announced the early redemption of its outstanding 4.50% Senior Notes due June 2023 at a redemption price equal to the principal amount of $500.0 million, plus accrued and unpaid interest to, but excluding the date of redemption. The redemption price is expected to be paid on or about March 8, 2023. SVC currently expects to fund this redemption with the proceeds from the net lease mortgage notes transaction.

Brian Donley, Chief Financial Officer of SVC, made the following statement regarding today’s announcement:

“We are pleased with this financing for SVC which will be used to refinance our $500.0 million senior notes coming due this June. We are especially pleased with the terms of this financing given the general increase in market interest rates during the last year and in comparison to the implied trading yields on our currently outstanding unsecured senior notes. We also think this financing demonstrates to the market that SVC has multiple options available to it for refinancing maturing debt in the future.”