Business Context and Reporting Period
This Form 8-K Current Report was filed by Ashford Hospitality Trust, Inc. on November 25, 2020, with the report date reflecting events occurring through November 26, 2020. The filing details a series of fee deferrals and waivers granted by the independent directors of Ashford Inc. to Ashford Trust to manage liquidity during the reporting period.
Key Financial Metrics and Liquidity
The filing does not provide comprehensive revenue, profit, or cash flow statements. However, it discloses specific liquidity-related figures regarding deferred obligations:
- Deferred Advisory Fees: Approximately $3 million in base advisory fees for December 2020 were deferred, along with previously deferred fees for October and November 2020.
- Deferred Lismore Success Fees: Approximately $3.3 million in success fees related to forbearance agreements negotiated in October and November 2020 were deferred, along with any potential fees for December 2020.
- Payment Due Date: All deferred fees under the Advisory and Lismore agreements are now due and payable on January 4, 2021.
- ERFP Balance: Ashford Inc. remains obligated to provide approximately $11.4 million in additional funding related to the Embassy Suites New York acquisition.
Material Changes and Agreements
The primary material change involves the extension of payment terms for management and success fees:
- Advisory Agreement: The independent directors of Ashford Inc. granted an additional deferral for base advisory fees for October and November 2020 and deferred December 2020 fees. They also waived any claims for breach of the agreement arising from these deferrals.
- Lismore Agreement: Similar deferrals were granted for Lismore success fees for October, November, and December 2020, with a waiver of breach claims.
- Set-Off Rights: Ashford Trust granted Ashford Inc. the right to set-off the deferred fees against the $11.4 million Embassy Suites New York ERFP Balance at Ashford Inc.'s sole discretion.
- FF&E Waiver: A prior waiver regarding the requirement to replace furniture, fixtures, and equipment (FF&E) for the Embassy Suites New York was reaffirmed.
Outlook, Risks, and Contingencies
Management commentary is limited to the execution of these deferrals to preserve cash. The filing highlights the following risks and contingencies:
- Liquidity Management: The repeated deferrals indicate ongoing pressure on cash flow, necessitating extensions of payment obligations to the affiliated advisor.
- Set-Off Contingency: The $11.4 million funding obligation from Ashford Inc. is now subject to potential reduction if Ashford Inc. exercises its right to set-off the deferred fees.
- Contractual Compliance: While breach claims were waived for the specific deferrals, the company remains subject to the terms of the Advisory and Lismore agreements for future periods.
Investor Verification Checklist
- Verify the total accumulated amount of deferred fees for October, November, and December 2020 to assess the full liability due on January 4, 2021.
- Confirm whether Ashford Inc. has exercised or intends to exercise the set-off right against the $11.4 million ERFP Balance.
- Review the impact of these deferrals on the company's working capital and ability to meet other debt obligations.
- Check subsequent filings for any further deferrals or changes to the payment schedule beyond January 4, 2021.