DALLAS, Sept. 21, 2020 /PRNewswire/ -- Ashford
Hospitality Trust, Inc. (NYSE: AHT) ("Ashford Trust" or the
"Company") today sent a letter to its common shareholders
explaining why voting in favor of the two proposals at the
Company's upcoming Special Meeting is in the best interest of
Ashford Trust and its common shareholders. The Company also
responded to the uninformed and misleading press release issued by
Cygnus Capital.
The text of the letter follows:
Dear Fellow Shareholders:
We are asking for your important vote in support of the two
proposals at our upcoming Special Meeting scheduled for
October 6, 2020. The approval
of those proposals is necessary to complete the Company's proposed
preferred stock exchange offers. These strategic steps are
crucial to the long-term viability of our business due to the
severe impact of COVID-19 on the entire travel industry.
Without your support, there is substantial doubt as to the
Company's ability to continue as a going concern and the value of
your shares will be imperiled. WE URGE YOU TO VOTE "FOR" THE
PROPOSALS TO ENABLE THE EXCHANGE OFFERS.
We also want to set the record straight on the statements made
in the release issued by Cygnus Capital on September 17, 2020 regarding the commencement of
the Exchange Offers and the Consent Solicitation for any and all
outstanding shares of the Company's preferred stock. The Company
and its advisors have reviewed Cygnus Capital's statements and
believe they are misguided and misleading. For the sake of all the
various stakeholders in the Company, we believe it is important to
clarify Cygnus Capital's statements.
Impact of Covid-19 on the Company's Hotels
Both the hotel industry and the Company have been experiencing
historically negative hotel performance since March 2020. In
the second quarter, the Company reported comparable total hotel
revenue decreased 89.4% versus the second quarter
2019. The Company also reported comparable hotel EBITDA
in the second quarter was negative $43.5
million vs. positive $143.0
million in the second quarter of 2019, a decline of
130%. Lodging research firms, such as Smith Travel
Research and HVS, believe that U.S. hotel industry RevPAR will be
down over 50% in 2020 vs. full year 2019. This is many times
worse than the difficulties hotels experienced in the last two
industry downturns: after the tragedy of 9/11 and during the Great
Recession.
Visibility of demand in our industry is at all-time lows as
booking windows have compressed dramatically, group and corporate
customers are staying at home, and the pace of the recovery is
unpredictable. The Company has taken proactive actions resulting in
an approximate 25% reduction in corporate G&A and reimbursable
expenses. We have aggressively cut costs at our properties,
including layoffs and furloughs of thousands of associates, who
make up the backbone of our hotels. We are operating our
hotels at cost structures thought impossible only months ago as we
have aggressively pushed to save every dollar possible.
While we can control many of our costs, we cannot induce
demand. We cannot force the economy to reopen and customers
to come back to our hotels. Many of our hotels are still operating
at losses and it will likely be many months before we can cover all
of our various liabilities with existing cash flow.
Balance Sheet Impact & Timing
Nearly all of our approximately $3.8
billion of property level debt has been in default at some
point in the past six months as the properties have not been
generating enough cash flow to pay the interest expense on our
property level loans. In addition, the Company suspended its
common stock dividend conserving approximately $7 million per quarter and suspended its
preferred stock dividends conserving approximately $10.6 million per quarter.
While we are hopeful that the economy will recover quickly,
industry data is showing otherwise. Given the cash needs of
the Company and our finite available liquidity, waiting until there
is certain knowledge of the recovery could spell disaster for the
Company. We will pursue strategies that we believe will protect
long-term value for the common shareholders, as difficult as those
decisions can be in the short term. We believe we must act
now to strengthen our capital structure, reduce future cash needs,
particularly from accruing preferred dividends, and grow the equity
base of the Company. Just one year of preferred dividends is
more than our current equity market capitalization. If the
Company is successful in exchanging all of its preferred stock into
common stock, it will have the ability to provide an additional
$565 million of potential value to
future common equity holders that is not available today.
Without these steps, the future survival of the Company is much
more uncertain.
Addressing the False Claims by Cygnus Capital
- Misstatements that the Hotel Recovery is Accelerating:
While operations have improved somewhat since April this year, our
hotels are not ramping up nearly as quickly as Cygnus Capital
suggests. The Smith Travel Research data they cherry picked
from the week of September 5th to
demonstrate an industry recovery is inflated due to the Labor Day
weekend and incremental demand from displaced families caused by
Hurricane Laura. Cygnus Capital also paints an unjustified rosy
picture when stating that the hotel industry has been rapidly
recovering. To the contrary, while hotel owners did see an
initial ramp up in leisure demand over the summer, that recovery
has stalled going into the fall as corporate hotel demand has
failed to materialize. Additionally, even after the "rapid
recovery" this summer, the U.S. hospitality industry is still at
levels well below the most difficult moments of the Financial
Crisis. Many business travel oriented hotels across
the United States are still
closed, and many of those that are open continue to run operating
shortfalls.
- Incorrect Statements that the Hotel Industry Will Recover in
One Year: Cygnus Capital inaccurately claims that the
hotel industry should see a near full recovery within a year. Most
industry experts, such as Smith Travel Research and HVS, believe
that hotel fundamentals will not return to 2019 levels until at
least 2024, not 2021. For some historical context, it
took four years for U.S. hotel RevPAR to recover from the Financial
Crisis over a decade ago and three years to recover following the
tragedy of 9/11. Today's situation is far worse than those
two events.
- Lack of understanding about our portfolio: Multiple
aspects of their letter show a lack of understanding of the
Company. For example, Cygnus' letter inaccurately claims that
luxury is a meaningful portion of Ashford Trust's asset base, which
it is not. We would like to remind investors that less than
two percent of the Company's assets are luxury hotels. The
letter also attempts to correlate certain industry peers' ability
to cover debt service to Ashford Trust's ability to cover debt
service. This is obviously not an applicable data point as
the leverage profile of Ashford Trust is materially different from
that of those named industry peers. Cygnus Capital is either
ignorant of our capital structure or they are being disingenuous in
their commentary.
- Lack of understanding of the hotel transactions and our
capital structure: Cygnus Capital claims that asset sales
would be a good strategy for the Company to pursue. Unfortunately,
the relatively few hotel assets trading in the market are at levels
down between 25% and 40% from pre-COVID values, which if applied to
our hotels means that a significant number of our hotels and loan
pools do not have positive equity value. In addition, most of our
assets are in cross-collateralized debt pools that make it
extremely difficult to sell individual assets that might have
equity value today.
- Lack of understanding of our financials: Cygnus
Capital's statements regarding our liquidity position and Q2 cash
utilization are also incorrect as they stated in their letter that
the Company utilized $77 million of
cash in the second quarter. As of June 30,
2020, the Company held cash and cash equivalents of
$165.5 million and restricted cash of
$95.3 million. During the three
months ended June 30, 2020, we
utilized cash, cash equivalents and restricted cash of $106.2 million. Additionally, since the
Company is still negotiating additional forbearance agreements with
lenders, it does not have full access to the restricted cash on the
Company's balance sheet.
- Lack of understanding of our corporate structure and
advisory agreement: Cygnus Capital's suggestion of a
liquidation strategy is equally flawed as it is not a viable
strategy for either the common or preferred stakeholders of the
Company. An orderly liquidation of the Company would likely trigger
a termination fee under our advisory agreement with Ashford Inc.
(NYSE American: AINC). This termination fee could be
significantly higher than the existing liquidity of the Company and
we believe this fee would be senior to both preferred and common
shareholder claims, potentially wiping out both shareholder
classes.
As is always the case, the Ashford Trust Board of Directors and
management team are open to all ideas to enhance long-term
shareholder value. Cygnus Capital failed to take advantage of this
fact as they launched their hostile campaign without ever reaching
out to the Company to get better informed. A simple
discussion with the Company's management team prior to launching
their campaign could have helped them understand the situation more
fully and significantly improved their diligence. It also could
have helped the Company's management team understand their concerns
in a less hostile situation, as well as avoiding wasting Company
time and resources on a costly activist campaign.
Cygnus Capital has also disclosed similar ownership amounts of
the Company's preferred stock, making it likely that they have
initiated some sort of event-driven, short-term pair trade.
Given the timing and the sizing of their recent common and
preferred stock purchases and their lack of interest in engaging in
dialogue with Company, it appears their interests may be focused on
the short-term performance of the stock and not on the long-term
health and viability of the Company. We are not convinced
they have the long-term interests of shareholders in
mind.
YOUR BOARD OF DIRECTORS URGES YOU TO VOTE "FOR" THE TWO
PROPOSALS AT THE OCTOBER
6th SPECIAL MEETING TO PROTECT YOUR
INVESTMENT.
YOUR VOTE IS CRITICAL NO MATTER HOW MANY OR HOW FEW SHARES YOU
OWN. If you do not vote, it will have the same effect as rejecting
the proposed amendment to our corporate charter, which is necessary
in order to complete the Exchange Offers and Consent
Solicitation. We urge you to vote "FOR" the two proposals on
the proxy card. If you have questions or need assistance in
voting your shares, please contact our proxy solicitation firm, at
1-877-787-9239 or by email at Ashord@investor.morrowsodali.com.
Thank you for your continued support during these challenging
times.
Where You Can Find Additional Information
Completion of the Exchange Offers and the Consent Solicitation
are subject to certain conditions, which are set forth in more
detail in the Company's registration statement on Form S-4 (as
amended, the "Registration Statement") filed with the Securities
and Exchange Commission ("SEC") for the purpose of registering the
Common Stock issued pursuant to the Exchange Offers under the
Securities Act of 1933, as amended. The Registration Statement was
declared effective on September 9,
2020 at 4:00 p.m. ET. The
Company has also filed with the SEC a Schedule TO for the Exchange
Offers and a definitive proxy statement on Schedule 14A to solicit
proxies from the holders of its Common Stock to approve the
relevant items upon which the holders of the Common Stock will be
entitled to vote (the "Proxy Statement"). The Proxy Statement was
first mailed to stockholders on or about September 10, 2020. The Company may extend or
terminate the Exchange Offers under certain circumstances as
described in the Registration Statement. Additional information
regarding these transactions can be found in the Company's investor
presentation available at
https://dealroadshow.finsight.com/retail-roadshows.
Preferred stockholders who have questions about the Exchange
Offers should contact:
D.F. King & Co., Inc., as Information Agent and Exchange
Agent
Banks and Brokers Call Collect: (212) 269-5550
All Others Call Toll-Free: (800) 967-4607
Email: aht@dfking.com
RBC Capital Markets, LLC, as Dealer Manager
Tel: (212) 618-7843
Toll-free: (877) 381-2099
Email: liability.management@rbccm.com
Certain Information Regarding Participants
The Company, its directors and certain of its executive officers
are participants in the solicitation of proxies from the Company's
shareholders in connection with the Exchange Offer and Consent
Solicitation. Information about the Company's executive officers
and directors and their ownership of the Company's stock is set
forth in the definitive proxy statement that was filed with the SEC
on September 10, 2020.
This does not constitute an offer of any securities for sale.
Further, this communication is not a solicitation of a proxy from
any security holder of the Company and shall not constitute the
solicitation of an offer to buy securities.
Preferred Holders should read the Registration Statement and
the Schedule TO for the Exchange Offers as they contain important
information about the Exchange Offers, the Company and the other
proposed transactions. Holders of Common Stock should read the
Proxy Statement and any other relevant documents because they
contain important information about the Company and the proposed
transactions. The Registration Statement, Schedule TO and Proxy
Statement are available for free on the SEC's
website, www.sec.gov. The prospectus included in the
Registration Statement and additional copies of the Proxy Statement
will be available for free from the Company for the applicable
shareholders of the Company.
Ashford Hospitality Trust is a real estate investment trust
(REIT) focused on investing predominantly in upper upscale,
full-service hotels.
Ashford has created an Ashford App for the hospitality REIT
investor community. The Ashford App is available for free download
at Apple's App Store and the Google
Play Store by searching "Ashford."
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. Forward-looking
statements in this press release include, among others, statements
about the Company's strategy and future plans. 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
statements are subject to numerous assumptions and uncertainties,
many of which are outside Ashford Trust'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: the impact of the novel strain of coronavirus
(COVID-19) on our business; our ability to meet the NYSE continued
listing standards; our ability to repay, refinance or restructure
our debt and the debt of certain of our subsidiaries; general
volatility of the capital markets and the market price of our
common stock and preferred 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 Trust'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 will not publicly update or revise any
forward-looking statements, whether as a result of new information,
future events or circumstances, changes in expectations or
otherwise except to the extent required by law.
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SOURCE Ashford Hospitality Trust, Inc.