DALLAS, May 2, 2020 /PRNewswire/ -- The Ashford
Group of Companies announced today that all of its companies,
including Ashford Inc. (NYSE American: AINC), Ashford Hospitality
Trust, Inc. (NYSE: AHT) ("Ashford Trust"), and Braemar Hotels &
Resorts Inc. (NYSE: BHR) ("Braemar"), will return all funds
provided by the Small Business Administration's ("SBA") Paycheck
Protection Program ("PPP") due to the agency's recently changed
rules and inconsistent federal guidance that put the companies at
compliance risk.
Federal Government assistance is required to repair the most
significant damage in history to U.S. hotels and hospitality
businesses caused by government-ordered shutdowns and restrictions
on travel and public gatherings. Industry-wide revenue is down
approximately 80-90% as a result of the government orders,
resulting in the immediate loss of 3.9 million jobs, according to
the American Hotel & Lodging Association.
Some media and members of Congress have falsely implied that
Ashford accessed "loopholes" in the CARES Act to qualify for the
PPP funds. In fact, Congress designed the PPP to specifically allow
companies that own multiple hotel properties to obtain separate
loans for each property as a means to prevent the economic collapse
of the hospitality industry that is now occurring. This is why
Congress wrote the CARES Act to waive the SBA's standard
affiliation rules for hotels and restaurants, as follows:
[A]ny business concern that employs not more than 500
employees per physical location of the business concern and that is
assigned a North American Industry Classification System code
beginning with 72 at the time of disbursal shall be eligible to
receive a covered loan.
This specific provision of the law was referenced in the SBA's
Paycheck Protection Program Frequently Asked Questions ("FAQ")
published on April 13, 2020:
Question 24: How do the $10 million cap and affiliation rules work for
hotels and restaurants (and any business assigned a North American
Industry Classification System (NAICS) code beginning with
72)?
Answer: Under the CARES Act, any single
business entity that is assigned a NAICS code beginning with 72
(including hotels and restaurants) and that employs not more than
500 employees per physical location is eligible to receive a PPP
loan.
Ashford relied on the statute as passed by Congress and the
guidance provided by the SBA to apply for PPP loans in good
faith. Ashford also relied on the SBA's view that its
affiliation rules do not apply to any business entity that is
assigned a NAICS code beginning with 72 and that employs not more
than a total of 500 employees. Under these rules, qualified hotels
and restaurants that are owned by a parent business are permitted
to apply for separate PPP loans, provided that each property
maintains a unique EIN. The $10
million maximum loan amount under the PPP applies to every
eligible business entity.
Ashford applied for PPP loans for each qualified hotel property
in full compliance with this guidance, and in the belief it was our
obligation to protect our employees, vendors, communities, lenders
and shareholders from unfair economic damage.
Since we submitted our loan applications, the rules have changed
almost daily. In fact, the SBA has issued numerous Interim
Final Rules and at least 12 separate FAQs. For example, the
SBA added the following new guidance relating to public companies
on April 23, 2020 (weeks after we
submitted our PPP applications):
31. Question: Do businesses owned by large
companies with adequate sources of liquidity to support the
business's ongoing operations qualify for a PPP loan?
Answer: In addition…borrowers should review
carefully the required certification that "[c]urrent economic
uncertainty makes this loan request necessary to support the
ongoing operations of the Applicant." Borrowers must make this
certification in good faith, taking into account their current
business activity and their ability to access other sources of
liquidity sufficient to support their ongoing operations in a
manner that is not significantly detrimental to the business. For
example, it is unlikely that a public company with substantial
market value and access to capital markets will be able to make the
required certification in good faith, and such a company should be
prepared to demonstrate to SBA, upon request, the basis for its
certification.
Ashford companies do not have "substantial market value"
compared to the majority of other publicly-traded companies or even
Ashford's own market values before the government shutdown
actions. We also now have limited access to the capital
markets across our companies.
More recently, the SBA issued a Fifth Interim Final Rule on
April 30, 2020, with the following
addition:
- Can a single corporate group receive unlimited PPP
loans?
No. To preserve the limited resources available to the PPP
program, and in light of the previous lapse of PPP appropriations
and the high demand for PPP loans, businesses that are part of a
single corporate group shall in no event receive more than
$20,000,000 of PPP loans in the
aggregate. For purposes of this limit, businesses are part of a
single corporate group if they are majority owned, directly or
indirectly, by a common parent. This limitation shall be
immediately effective with respect to any loan that has not yet
been fully disbursed as of April 30,
2020. Businesses are subject to this limitation even if the
businesses are eligible for the waiver of affiliation provision
under the CARES Act or are otherwise not considered to be
affiliates under SBA's affiliation rules.
While we believed then and continue to believe today that we
qualify for PPP loans based on the legislation and rule-making in
place at the time our applications were submitted, continuous SBA
rule changes and evolving opinions by Administration officials have
led us to conclude that we may no longer qualify. As a result, the
Ashford Group of Companies will return all PPP funds on or before
May 7, 2020, in accordance with SBA's
previously announced safe harbor.
Ashford management had no intention of crowding out any business
from gaining equal access to the PPP funds, and could not have
known that congressional appropriations for the program would be
insufficient to cover the needs of all other businesses in the
nation that have suffered similar harm. Congress and the
Administration should have known but chose to restrict funding when
the CARES Act was passed on March 27,
only to provide additional funding later. In fact, Congress
did not make any changes to the rules under which Ashford had
already applied for and received funds when it passed its second
version of the CARES Act nearly a month later on April 23. In
the face of continuing confusion, the need for immediate government
action to fix the PPP program and repair economic damage is acute
and growing.
"The hotel industry has been devastated by the COVID-19 pandemic
and resulting National Emergency," commented Monty J. Bennett, Ashford Inc.'s Chairman and
Chief Executive Officer and the Chairman of the Board of Ashford
Trust and Braemar. "Hotel industry executives met with the
Administration at the White House on March
17, 2020 to plead for help for our industry. We are
disappointed that, in an abundance of caution to avoid any risk of
non-compliance with the changed PPP rules, our actions mean that
our employees, vendors, communities and others in need will not
benefit from the PPP as Congress intended. We call on
Congress, the Treasury Department and the Federal Reserve to
provide assistance to the hotel industry to protect jobs and asset
values that have been severely impaired as a result of the pandemic
and the government's actions that have followed."
Ashford Inc. provides global asset management, investment
management and related services to the real estate and hospitality
sectors.
Ashford Hospitality Trust is a real estate investment trust
(REIT) focused on investing predominantly in upper upscale,
full-service hotels.
Braemar Hotels & Resorts is a real estate investment trust
(REIT) focused on investing in luxury hotels and resorts.
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 Ashford'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 the registrant'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; the ability of Ashford Trust 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 the registrant'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 Inc.