Service Properties Trust Sends Notice to Terminate IHG Agreements Covering 103 Hotels

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[{"type":"text","content":"\nIHG Failed to Pay Owner’s Priority Return for July\n\n\nTermination Date Set at November 30, 2020\n\n\nIHG Has 30 Days to Avoid Termination\n\n NEWTON, Mass.--(BUSINESS WIRE)--\nService Properties Trust (Nasdaq: SVC), or SVC, today sent a notice of event of default and termination to InterContinental Hotels Group plc (NYSE: IHG), or IHG, as a result of IHG’s failure to pay SVC approximately $8.4 million of required priority return for the month of July 2020. IHG has 30 days, or until Monday, August 24, 2020, to make the payment plus accrued interest to avoid termination of its operating agreements with SVC. The effective date of the termination set in the notice is November 30, 2020. IHG’s priority return payment of approximately $17.4 million is also due on August 1, 2020 and failure to pay such amounts will be an additional event of default, which would increase the amount IHG is required to pay to avoid termination.\n\n\nSVC’s agreements with IHG covering 103 hotels (three InterContinental®, five Kimpton® Hotels & Restaurants, 11 Crowne Plaza®, three Holiday Inn®, 20 Staybridge Suites® and 61 Candlewood Suites®) in 30 states in the U.S., the District of Columbia, Ontario, Canada and Puerto Rico require annual minimum returns and rents of $216.6 million and currently expire in 2036. IHG’s $100 million security deposit that SVC held to secure the minimum return payments under these agreements has been fully utilized. SVC has the right to keep the hotels branded and managed by IHG for up to one year post termination to aid in an orderly transition.\n\n\nAbsent a cure payment by IHG, SVC currently plans to transition management and branding of these 103 hotels from IHG to Sonesta International Hotels Corporation, or Sonesta, primarily under the Royal Sonesta, Sonesta and Sonesta ES Suites brands. SVC owns approximately 34% of Sonesta and would share in the benefit of these new management agreements and in the hotels’ performance to the extent they ramp up in the post-pandemic recovery.\n\n\nJohn Murray, President and Chief Executive Officer of SVC, made the following statement:\n\n\n“SVC and IHG have had a long relationship and we are in regular dialogue with them. We hope IHG cures this default so that we can move forward without a termination and rebranding. However, it is important to SVC that we enforce our agreements and s...

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