Playa Hotels & Resorts N.V. (“Playa” or the “Company”) is a leading owner, operator and developer of all-inclusive resorts in prime beachfront locations in popular vacation destinations. We own and/or manage a portfolio of 2321 resorts located in Mexico, the Dominican Republic and Jamaica. Unless otherwise indicated or the context requires otherwise, references in our condensed consolidated financial statements (our “Condensed Consolidated Financial Statements”) to “we,” “our,” “us” and similar expressions refer to Playa and its subsidiaries.

Due to the spread of the coronavirus (“COVID-19”) global pandemic, and in response to related governmental restrictions and advisories, reductions in scheduled commercial airline service, and potential health risks to our employees and guests, we have temporarily suspended operations at all of our resorts starting infrom late March through June 2020. Our resorts began reopening in July, in stages, based on incremental easing of government restrictions and advisories and increases in scheduled commercial airline service. On July 1, 2020, we reopened 8 out of our 21 resorts and intendsubsequently opened another 4 resorts. Currently, 12 out of our 21 resorts have reopened. We also implemented additional safety measures at our resorts to have ourmitigate the potential health risks of COVID-19.

Although we began operations suspended for the months of April, May and June. We cannot predict when the effects of the pandemic will subside, and thusin July, we cannot predict when we will be able to reopen our resorts or when our business will return to normalized levels.levels because we cannot predict when all effects of the pandemic will subside. The longer and more severe the pandemic, the greater the material adverse effect the pandemic will have on our business, results of operations, cash flows, financial condition, access to credit markets and ability to service our indebtedness.debt.

As COVID-19 has had a significant adverse impact on our business and financial condition, we are takingtook several actions to help remedy our liquidity situation, which include the following:

Our Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information. Certain information and disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. Accordingly, these unaudited interim Condensed Consolidated Financial Statements should be read in conjunction with our Consolidated Financial Statements as of and for the year ended December 31, 2019, included in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission (the “SEC”) on February 27, 2020 (the “Annual Report”).

In our opinion, the unaudited interim Condensed Consolidated Financial Statements have been prepared on the same basis as the annual Consolidated Financial Statements and include all adjustments, consisting of only normal recurring adjustments, necessary for fair presentation.

The results of operations for the three and six months ended March 31,June 30, 2020 are not necessarily indicative of the results of operations to be expected for the full year ended December 31, 2020, particularly given the impact of the COVID-19 pandemic noted above. All dollar amounts (other than per share amounts) in the following disclosures are in thousands of United States dollars, unless otherwise indicated.

Depreciation expense for property and equipment was $24.7$46.7 million and $22.1$47.7 million for the six months ended June 30, 2020 and 2019, respectively, and $22.0 million and $25.6 million for the three months ended March 31,June 30, 2020 and 2019, respectively.

For the threesix months ended March 31,June 30, 2020 and 2019, $0 million and $2.1$5.0 million of interest expense was capitalized on qualifying assets, respectively. For the three months ended June 30, 2020 and 2019, $0 million and $2.9 million of interest expense was capitalized on qualifying assets, respectively. Interest expense was capitalized on qualifying assets using the weighted-average interest rate of the debt.

For the three months ended March 31,June 30, 2020, our income tax expensebenefit was $1.1$14.6 million, compared to a $10.5$1.0 million income tax benefit for the three months ended March 31,June 30, 2019. The increase in our income tax expensebenefit of $11.6$13.6 million was driven primarily by an $8.1 million increased tax benefit due to lower pre-tax book income from our tax paying entities, a $1.2 million increase in the discrete tax benefit associated with future tax liabilities of certain Dominican Republic entities and a $5.8 million tax benefit associated with the sale of the Jewel Dunn’s River Beach Resort & Spa and Jewel Runaway Bay Beach Resort & Waterpark. The increased income tax benefit was partially offset by an $0.8 million increase in tax expense associated with foreign exchange rate fluctuations and a non-recurring $13.6$0.7 million tax benefit from the valuation allowance release during the three months ended March 31, 2019 and a $3.2 million immaterial correction of a prior year error duringJune 30, 2019.

For the threesix months ended March 31, 2020.June 30, 2020, our income tax benefit was $13.5 million, compared to an $11.6 million income tax benefit for the six months ended June 30, 2019. The increase in our income tax expensebenefit of $1.9 million was partially offsetdriven primarily by a $2.0$10.0 million increased tax benefit due to lower pre-tax book income from theour tax paying entities, and a $3.3$4.5 million decreaseincrease in the discrete tax expensebenefit associated with future tax liabilities of certain Dominican Republic entities.entities, and a $5.8 million tax benefit associated with the sale of the Jewel Dunn’s River Beach Resort & Spa and Jewel Runaway Bay Beach Resort & Waterpark. The increased income tax benefit was partially offset by a $3.2 million increase in income tax expense from an immaterial correction of a prior year error, a non-recurring $14.3 million tax benefit from the valuation allowance release during the six months ended June 30, 2019 and an $0.8 million increase in tax expense associated with foreign exchange rate fluctuations.

We issued 20,000,000 ordinary shares of our common stock to affiliates of Sagicor Group Jamaica Limited (“Sagicor”) as part of our business combination with certain affiliates of Sagicor in 2018. Sagicor is considered a related party due to its ownership of our ordinary shares by its affiliated entities and representation on our Board of Directors. We also pay Sagicor for insurance coverage for some of our Jamaica properties.

We have a service agreement with Sabre Hospitality Solutions (“Sabre”), a division of Sabre GLBL Inc., for use of a central reservation and direct booking system. Sabre also provides call center services. Sabre is considered a related party as a former member of our Board of Directors who resigned as a director in April 2020, serves on the board of Sabre Corporation, the parent company of Sabre GLBL Inc.

One of our offices is owned by our Chief Executive Officer and we sublease the space at that location from a third party.

We are involved in various claims and lawsuits arising in the normal course of business, including proceedings involving tort and other general liability claims, and workers’ compensation and other employee claims. Most occurrences involving liability and claims of negligence are covered by insurance with solvent insurance carriers. We recognize a liability when we believe the loss is probable and reasonably estimable. We currently believe that the ultimate outcome of such lawsuits and proceedings will not, individually or in the aggregate, have a material effect on our Condensed Consolidated Financial Statements.

The Dutch corporate income tax act provides the option of a fiscal unity, which is a consolidated tax regime wherein the profits and losses of group companies can be offset against each other. Our Dutch companies file as a fiscal unity, with the exception of Playa Romana B.V., Playa Romana Mar B.V. and Playa Hotels & Resorts N.V. Playa Resorts Holding B.V. is the head of our Dutch fiscal unity and is jointly and severally liable for the tax liabilities of the fiscal unity as a whole.

On December 14, 2018, our Board of Directors authorized the repurchase of up to $100.0 million of our outstanding ordinary shares as market conditions and our liquidity warrant. The repurchase program is subject to certain limitations under Dutch law, including existing, repurchase authorization granted by our shareholders. Repurchases may be made from time to time in the open market, in privately negotiated transactions or by other means (including Rule 10b5-1 trading plans). Depending on market conditions and other factors, these repurchases may be commenced or suspended from time to time without prior notice. During the three months

On June 12, 2020, we issued 4,878,049 ordinary shares repurchased are recordedwith a par value of €0.10 per share, in a private placement exempt from registration under the Securities Act of 1933, as treasury shares on the Condensed Consolidated Balance Sheet as of March 31, 2020.amended, in connection with our capital raising efforts. We received $19.6 million in cash consideration, after customary closing costs.

We adopted our 2017 Omnibus Incentive Plan (the “2017 Plan”) to attract and retain independent directors, executive officers and other key employees and service providers. As of March 31,June 30, 2020, there were 6,182,6116,226,580 shares available for future grants under the 2017 Plan.

Restricted share awards consist of restricted shares and restricted share units that are granted to eligible employees, executives, and board members and consist of ordinary shares (or the right to receive ordinary shares).

A summary of our restricted share awards from January 1, 2020 to March 31,June 30, 2020 is as follows:

We intend to meetuse the proceeds from the Additional Credit Facility for general corporate purposes. The obligations under the Additional Credit Facility are collateralized in a springingmanner that is substantially identical to the Existing Credit Agreement.

Prior to the maturity date, the Additional Credit Facility does not require principal payments, but does include mandatory prepayment requirements for the Term A3 Loan that are consistent with the Existing Credit Agreement. Mandatory prepayments are required for certain asset sales, casualty events and condemnation events (the “Triggering Events”) that are not reinvested in our business where our total net leverage ratio financial maintenance covenant, but only ifis above 4.00x. We may not voluntarily prepay any portion of the aggregate amount outstanding onAdditional Credit Facility prior to June 2023 without paying a make-whole premium equal to 100% of the interest that would have otherwise accrued from the date of such payment through June 2022 plus 50% of the interest that otherwise would have accrued from June 2022 to June 2023. Subsequent to June 2023, we may prepay any portion of the Additional Credit Facility without penalty.

In connection with the Additional Credit Facility, we terminated the remaining $15.0 million of unused capacity of our Revolving Credit Facility exceeds 35% ofunder the aggregate revolving credit commitments as defined in our Senior SecuredExisting Credit Agreement. The Additional Credit Facility (the “Covenant Trigger”). contains covenants, including a springing financial maintenance covenant, identical to those contained in the Existing Credit Agreement.

On March 19, 2019,June 12, 2020, we entered into a property loan agreement in the Third Amendment to Amended & Restated Credit Agreement (the “Third Amendment”) to exclude the lesser of $50.0 million and the aggregate amount of revolving credit commitments borrowed in connection with$110.0 million that has a fixed interest rate of 9.25% and matures on July 1, 2025 (the “Property Loan”). Prior to maturity, the Property Loan does not require principal payments. The Property Loan is collateralized by the mortgages of our Hyatt Ziva and Hyatt Zilara Cap Cana development project from bothproperties located in the calculationDominican Republic and the Hilton Rose Hall Resort & Spa located in Jamaica (collectively the “Properties”). We intend to use the proceeds of the Covenant Trigger,Property Loan to finance the operation and management of the Properties and for general corporate purposes.

Effective March 29, 2018, we entered into 2 interest rate swaps to mitigate the interest rate risk inherent to our floating rate debt. The interest rate swaps are not for trading purposes and have fixed notional values of $200.0 million and $600.0 million. The fixed rate paid by us is 2.85% and the variable rate received resets monthly to the one-month LIBOR rate, which results in us fixing LIBOR at 2.85% on $800.0 million of our Term Loan. The interest rate swaps mature on March 31, 2023.