Ashford Hospitality Trust Enhances Liquidity Position Through Strategic Transactions
December 26 2008 - 9:00AM
Business Wire
Ashford Hospitality Trust, Inc. (NYSE: AHT) today provided an
update on its strong liquidity position and announced a series of
actions to manage the sources and uses of the Company�s funds to
conservatively navigate through challenging market conditions and
enable opportunities that can create long-term shareholder value.
Liquidity Ashford currently has approximately $200 million of
unrestricted cash on hand, with $100 million conservatively
invested in U.S. Treasuries. Recently these amounts were reduced by
approximately $50M to partially pay down the Company�s credit
facility. The Company has approximately $29 million of hard debt
maturities in 2009 for which it is already seeking a negotiated
extension, and $75 million of hard debt maturities in 2010. These
loans currently have better than 2.0x debt service coverage. To
enhance interest coverage, in March 2008 the Company swapped $1.8
billion of fixed-rate debt to floating-rate debt at a spread of 264
basis points over LIBOR with a view that interest rates would
decline if RevPAR decelerated due to a slowing economy. Portions of
the debt provided a LIBOR cap of 3.75% and a LIBOR floor of 1.25%.
In early December 2008, the Company bought down the LIBOR floor to
0.75% through December 2009 to capitalize on LIBOR�s decline. At
the time of the swap transaction, the weighted average interest
rate on Ashford�s debt was 5.55%. Based on the recent 30-day LIBOR
rate of 0.47%, the average interest rate on Ashford�s debt, of
which approximately 95% is now floating rate is 3.24%. The combined
benefits of the swap and the lower current LIBOR may provide
interest savings of $65 million on an annualized basis. Commenting
on the Company�s liquidity position and the recent strategic
transactions, Monty J. Bennett, Ashford�s President and CEO,
stated, �The challenges facing the lodging industry today are
virtually unprecedented. In this environment, we have aggressively
enhanced our liquidity and implemented capital market strategies
ahead of the downturn to mitigate the impact. Certain fundamental
features of our company position us better to withstand these
challenging markets, namely: our full and select service hotel mix,
geographic diversity, industry leading brand representation, and an
affiliated property manager for nearly 1/3 of our portfolio that is
capable of being more proactive in cost saving measures. There is
undoubtedly a certain amount of liquidity that we will need to keep
to address issues throughout this downturn, but we believe
potential liquidity risks are manageable. We continue to execute
aggressive cost saving measures at the property level that include
payroll freezes, vendor contract renegotiations and adjustments to
service levels. In addition, corporate level cost containment plans
have been implemented which include reductions in overhead from
staff layoffs, salary freezes, and reduced benefits and fees along
with other cost saving measures. We will continue to be proactive
in all measures to best position the company for near term
sustainability and long term success.� Credit Facility Amendments
The Company has negotiated an amendment with the 11 banks in its
$300 million credit facility. The main provision changes to the
facility, which expires in 2012 after extensions, include: Reducing
the fixed charge coverage ratio to 1.25x effective immediately
until March 31, 2011, at which time the ratio steps up to 1.35x.
Reducing the revolver commitment level from $300 million to $250
million. Reducing the maximum leverage ratio from 75% to 65%.
Adjusting the grid pricing upward to a spread of 275 basis points
to 350 basis points. Suspending the dividend to the minimum REIT
requirements through 2009. Other definitions and provisions were
changed related to fees, total asset value, tangible net worth,
cross default provisions, and repurchases. Mr. Bennett added,
�Despite no immediate risk of violating our covenants, we wanted to
be proactive in this environment to address the impact of possible
future events. The new terms enhance our credit position, while
granting relief on the provision most likely to experience
threshold-level issues in the future.� Dividend Policy Effective
with the fourth quarter ending December 31, 2008, and in
conjunction with the Credit Facility Amendment outlined above, the
Board of Directors suspended the Company�s common stock dividend.
The Company expects to distribute the minimum dividend required to
maintain its REIT status in 2009, which is likely to be assessed,
if necessary, in the fourth quarter of 2009. With the removal of
the common dividend, the Company will pay the base rate for the
Company�s Series B Convertible Preferred Stock at $0.14 per share
for the fourth quarter ending December 31, 2008. Mr. Bennett noted,
�The decision to suspend the common stock dividend was made in the
best long-term interests of the Company and its shareholders in
order to enhance liquidity and set aside capital for future
redeployment. Long term shareholder value can be enhanced by the
dividend suspension through a variety of means, including share
buybacks which can result in stronger per share metrics and capital
appreciation.� Capital Sources and Uses The Company maintains a
proactive approach to capital sourcing. Potential sources of
capital include: positive cash flow from operations, property
refinancing proceeds, asset sales, property level preferred equity,
reductions in the common stock dividends, return of capital from
existing mezzanine loans, and income derived from the interest rate
swap. Uses of funds are expected to include possible operating
shortfalls from mezzanine investments, owner-funded (above
reserves) capital expenditures, debt paydowns, and repurchases of
the Company�s securities. Ashford Hospitality Trust is a
self-administered real estate investment trust focused on investing
in the hospitality industry across all segments and at all levels
of the capital structure, including direct hotel investments, first
mortgages, mezzanine loans and sale-leaseback transactions.
Additional information can be found on the Company's web site at
www.ahtreit.com. Certain statements and assumptions in this press
release contain or are based upon "forward-looking" information and
are being made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. These
forward-looking statements are subject to risks and uncertainties.
When we use the words "will likely result," "may," "anticipate,"
"estimate," "should," "expect," "believe," "intend," or similar
expressions, we intend to identify forward-looking statements. Such
forward-looking statements include, but are not limited to, the
timing for closing, the impact of the transaction on our business
and future financial condition, our business and investment
strategy, our understanding of our competition and current market
trends and opportunities and projected capital expenditures. Such
statements are subject to numerous assumptions and uncertainties,
many of which are outside Ashford's control. These forward-looking
statements are subject to known and unknown risks and
uncertainties, which could cause actual results to differ
materially from those anticipated, including, without limitation:
general volatility of the capital markets and the market price of
our common stock; changes in our business or investment strategy;
availability, terms and deployment of capital; availability of
qualified personnel; changes in our industry and the market in
which we operate, interest rates or the general economy; and the
degree and nature of our competition. These and other risk factors
are more fully discussed in Ashford's filings with the Securities
and Exchange Commission. The forward-looking statements included in
this press release are only made as of the date of this press
release. Investors should not place undue reliance on these
forward-looking statements. We are not obligated to publicly update
or revise any forward-looking statements, whether as a result of
new information, future events or circumstances, changes in
expectations or otherwise.
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