ATLANTA, Sept. 28, 2020 /PRNewswire/ -- Cygnus
Capital, Inc. (together with its affiliates, "Cygnus Capital"), one
of the largest stockholders of Ashford Hospitality Trust, Inc. (the
"Company" or "AHT") (NYSE:AHT), beneficially owning approximately
7.8% of the Company's outstanding common stock, today highlighted
significant reservations made by Institutional Shareholder Services
("ISS") in its report dated September 25,
2020 concerning AHT's upcoming special meeting of
stockholders scheduled to be held on October
6, 2020. In ISS's recommendation for stockholders to
proceed "with caution," ISS noted the following:
"Over the years, unaffiliated
shareholders have been subjected to egregious governance-related
practices and transactions that seemed to benefit one company
in the Ashford group at the expense of another, all of which one
could argue were in part to perpetuate the influence and control of
the Bennett family over these entities."
"The fact that the Ashford-related
companies received administrative subpoenas in June 2020 relating to an SEC investigation into
related party transactions and accounting policies should also
give shareholders pause when considering the merit of any company
action and whether it is truly in their interests."
"Investors that agree with
the dissident's outlook for an industry recovery may likewise
opt for a wait-and-see approach, particularly since the
company's efficient means of value destruction have stripped the
majority of the downside risk that would typically accompany such a
decision."
Despite AHT management and industry data showing the hospitality
industry is improving, management would like you to believe they
are diluting common stockholders because it is the only
option. It is not. Diluting common stockholders seems
to be the best option to keep fees flowing to AHT's external
manager, Ashford, Inc. ("AINC"), which is controlled by AHT's
insiders. Just look at the facts:
- AHT is managed by AINC, another public company which on a fully
diluted basis is owned ~70.1% by AHT's Chairman, Monty Bennett, his father and AHT's Chairman
Emeritus, Archie Bennett, Jr., and
other AHT insiders.
- AHT and AINC have substantially the same management team.
- AHT has been paying over $10
million/quarter in fees to AINC this year, despite the
market disruption caused by COVID-19.
- AINC paid, just two weeks ago, a $7.9
million quarterly dividend to its Series D preferred stock,
nearly all of which will go to the Bennett family.
AHT common stockholders shouldn't be essentially wiped out while
the Bennett family and other AHT insiders continue to enrich
themselves. AHT common stockholders have the power to stop
the exchange offers by voting AGAINST the proposals to amend
AHT's corporate charter and issue common stock in the exchange
offers at AHT's upcoming special meeting (the "special meeting
proposals").
The Hospitality Industry Is Showing Signs of
Recovery.
After being hit by one of the worst economic crises in history,
the hospitality industry is showing signs of improvement.
Third party analysts and data sources confirm a steady rebound in
revenue.
- According to Deutsche Bank and STR, for the week ending
September 12, 2020, the four-week
rolling average of occupancy of U.S. hotels is back to only being
down ~27.1% year over year verses at the height of the crisis of
being down ~77.0% in April.
- Against a favorable year over year comp, the Labor Day weekend
produced an occupancy level of only down 18.9%.
- In geographies where COVID-19 is generally under control, such
as China, occupancies are already
back pre-COVID-19 levels suggesting that the U.S. recovery could be
swift once a vaccine or other measures are in place.
Wall Street Analysts Predict a Significant Improvement in
AHTs Revenue.
- The consensus estimate of five leading investment banks is that
AHT recovers to $1.0 billion in
annual revenue next year (2021).
- According to these models, AHT will be covering operating, debt
service and preference payments starting in Q4 2021.
- While it is likely that AHT will still have accumulated arrears
and expenses to pay down and may not have sufficient cashflow to
pay a common dividend in 2021, these models point to the potential
for cashflow sufficient to support common dividends in 2022.
AHT - Ashford
Hospitality Trust
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Wall Street
Analyst Estimates, as of 9/27/2020
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Q2 Act.
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Q3 Est.
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Q4 Est
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2020 Est
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2021 Est
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2022 Est
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2023 Est
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Revenue, in millions
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43.1
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115.6
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149.8
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590.0
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999.9
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1228.3
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1303.0
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Y/Y
Growth
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-89.6%
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69.1%
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-57.8%
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-60.7%
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69.4%
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22.9%
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6.1%
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Source:
Deutsche Bank, UBS, Janney, Baird, B. Riley FBR
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If There Truly Is a Liquidity Crisis at AHT, the Independent
Directors Should Immediately Do the Following:
- Disclose the amount of the termination fee AINC claims would be
due if AHT terminated its advisory agreement with AINC. It is
unconscionable that this has not been disclosed to stockholders, as
the AHT Board prepares to essentially wipe out the value of the
existing common stock.
- Release a comparative analysis of how the AHT Board has argued
they can't explore many alternative transactions because doing so
would trigger a termination fee owed to AINC and yet they can
simultaneously sign off and approve of a highly dilutive
transaction to common stockholders that seems to only benefit
AINC.
- Disclose if any attempt was made to ask AINC for a reduction or
forbearance of AHT's advisory or management fees owed to AINC due
to the COVID-19 crisis.
- Disclose the weekly property level occupancy, ADR and RevPAR
for every asset of AHT so that stockholders can determine and
monitor the liquidity needs of the Company.
How Is AINC Flush But AHT Is Insolvent?
- AINC was able to pay a ~$7.9
million preferred quarterly dividend just two weeks ago on
September 14, 2020. This dividend
annualized is $31.6 million. Nearly
all of it will go to the Bennett family.
- 67% of AINC's revenue came from AHT this year.
- Unfortunately, AINC is controlled by the Bennett family and
other insiders, while AHT is owned predominately by unaffiliated
common stockholders.
- Management has threatened to put AHT into bankruptcy if you
don't vote to approve all special meeting proposals that are
necessary to consummate the exchange offers. They have already
driven the stock price to $1.50.
Could they do any worse? Cygnus Capital urges all common
stockholders to vote AGAINST all special meeting
proposals.
Many Alternatives Exist to Create Value for Common and
Preferred Stockholders
- Do Nothing. Cygnus Capital believes the
Company has sufficient cash (~$249
million as of Q2 2020) to ride out the impact of
COVID-19. Cygnus Capital believes that approximately 30% of
AHT's hotels are likely at or very near property level breakeven,
including debt service. The remainder of AHT's hotels appear
to need just a 10-15% increase in occupancy to achieve this
goal. The industry trends are all positive. Cygnus
Capital believes that lenders to AHT would generally rather extend
some terms to AHT than to foreclose assets. If AHT is able to
make it through this difficult period, the common and preferred
stock could dramatically recover. AHT Management themselves
have said $1.6B in equity value
recovery is possible. Cygnus Capital agrees.
- Sell to a Stronger REIT. AHT Management says
they can't sell assets in an orderly way or merge with a larger
REIT because a termination fee to AINC might be due. Have the
independent directors of AHT formed a committee to explore a
sale? Have the independent directors of AHT even asked AINC
what the amount of the termination fee is? Have they
explored a middle ground where AINC would stay as a third party
manager for AHT's assets inside a stronger acquiring
REIT? Cygnus Capital believes many REITs or private
equity firms would be interested in acquiring the AHT
portfolio. AHT has quality assets. Cygnus Capital
questions whether the independent directors of AHT have performed
their fiduciary duty to AHT stockholders to seriously consider such
options.
- Take on "Bridge Loan" at AHT Corporate Level. AHT
Management says AHT may have to go bankrupt if the common
stockholders do not approve the special meeting proposals needed to
consummate the dilutive exchange offers. AHT's share price is
already down 95.5% from its 52 week high. Yet, Cygnus Capital
has spoken with several capital providers who would be willing to
extend a working capital line to the Company secured by the
Company's assets as a bridge loan. This line would likely
carry a low double digit interest rate and standard industry
covenants for a loan of this type, but it would provide a bridge
for the next few quarters to give the Company more time to get back
to a cash flow positive position.
- Reduce/Forbear Fees to AINC. Has AHT requested a
reduction or forbearance in its fees payable to AINC? Why
should AINC insiders and management get paid while AHT common
stockholders get diluted? AINC is able to payout ~$8M every quarter to the Bennett family and yet
AHT claims it is about to go broke. Follow the money, it
doesn't add up.
Cygnus Capital urges AHT common stockholders to vote AGAINST
all proposals at AHT's special meeting of stockholder to prevent
the consummation of AHT's exchange offers which will dilute common
stockholders by ~94% dilution.
If you have already voted For the special meeting proposals,
you have every legal right to change your vote. Vote AGAINST
all special meeting proposals today!
About Cygnus Capital, Inc.
Cygnus Capital, Inc. is an integrated real estate investment and
alternative asset management company focused on opportunistic,
special situation, and distressed real estate investments. Cygnus
targets long term, absolute returns for investors by applying a
differentiated approach to real estate investing. By placing an
emphasis on the acquisition, workout, and disposition of real
estate debt assets characterized by their complexity, inefficiency,
and niche qualities, Cygnus Capital is able to target superior,
absolute returns for its investors. Cygnus Capital and its
affiliates own approximately 1.9% of the outstanding shares of the
Series D Preferred Stock, 2.4% of the outstanding shares of the
Series F Preferred Stock, 2.4% of the outstanding shares of the
Series G Preferred Stock, 4.8% of the outstanding shares of the
Series H Preferred Stock, and 2.4% of the outstanding shares of the
Series I Preferred Stock.
Written materials are submitted voluntarily pursuant to Rule
14a-6(g)(1) promulgated under the Securities Exchange Act of 1934.
This is not a solicitation of authority to vote your proxy. Cygnus
Capital is not asking for your proxy card and will not accept proxy
cards if sent. The cost of this filing is being borne entirely by
Cygnus Capital and its affiliates.
PLEASE NOTE: Cygnus Capital is not asking for your proxy card
and cannot accept your proxy card. Please DO NOT send us your proxy
card.
Contact:
Christopher Swann
CEO, Cygnus Capital, Inc.
cswann@cygnuscapital.com
(404) 465-3685
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SOURCE Cygnus Capital, Inc.