Ashford: Insolvency imminent without new financing

Hotel REIT warns of bankruptcy as pandemic nears one-year mark

National /
Dec.December 21, 2020 04:46 PM
Ashford Hospitality Trust CEO Rob Hays with the W Hotel in Atlanta. (Ashford Hospitality, Marriott)

Ashford Hospitality Trust CEO Rob Hays with the W Hotel in Atlanta. (Ashford Hospitality, Marriott)

 

Ashford Hospitality Trust is running on fumes, the real estate investment trust disclosed Monday.

The Dallas-based owner of upscale lodging assets, one of the nation’s largest REITs specializing in hotels, said it might be forced to seek bankruptcy protection early next year unless it gets new financing.

Ashford is seeking approximately $200 million initially and is prepared to hand over 20 percent of company equity to secure the debt, according to paperwork it filed with the Securities and Exchange Commission. The company said it was “engaged in a process regarding a potential financing” but did not specify what entity might issue it.

Shares of its stock fell just over 6 percent today. Ashford listed $3.8 billion in assets at the end of September, down nearly $1 billion from last year.

The company also said Monday it would issue approximately $40 million worth of new shares, pending approval from its shareholders. Ashford warned that failure to approve the stock issuance could throw the company into bankruptcy or liquidation, resulting in “zero recovery for common shareholders.

Earlier this month Ashford said it had entered a purchase agreement with Lincoln Park Capital for up to $40 million in equity.

In September Ashford sold its 310-key hotel at 60 West 37th Street in Manhattan to Magna Hospitality Group for $115 million, a 41 percent discount on the $195 million it paid for the Embassy Suites site 18 months prior, according to property records.

Ashford has burned through nearly $230 million in cash during the past 12 months as the pandemic devastated the hospitality industry, whose leaders have praised the new $900 billion stimulus package agreed to by House and Senate leaders Sunday.

“In these most challenging times for hotels in our nation’s history, we appreciate the bipartisanship displayed by congressional leadership and members across the country,” said Cecil Staton, president of the hotel owners association AAHOA.

Approximately $284 billion of the stimulus bill is expected to be for forgivable PPP loans.

Ashford returned $38 million in PPP loans earlier this year after public pressure mounted against it and two other lodging companies connected to Texas hotelier Monty Bennett, following revelations that some small businesses had been shut out of the loan program.

Now in a more dire financial position, the company may be more inclined to accept federal aid, especially if it cannot secure financing in private debt markets. An Ashford representative said the company had no comment.





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