Business Context and Reporting Period
Company: Ashford Hospitality Trust, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: July 1, 2009
Event: The Operating Partnership, Ashford Hospitality Limited Partnership, entered into two interest rate derivative transactions known as "flooridors" to manage interest rate exposure.
Key Financial Metrics and Transaction Details
The filing details the purchase of two 1-year flooridors with a combined notional amount of $3.6 billion. The Company paid upfront costs for these instruments and has no further liability to the counterparties.
- First Flooridor:
- Notional Amount: $1.8 billion
- Term: December 14, 2009 to December 13, 2010
- Trigger: Counterparty pays when LIBOR is below 1.75%
- Cap: Liability capped at LIBOR of 1.25%
- Maximum Potential Payment: 0.50% of notional amount if LIBOR stays below 1.25%
- Second Flooridor:
- Notional Amount: $1.8 billion
- Term: December 13, 2010 to December 13, 2011
- Trigger: Counterparty pays when LIBOR is below 2.75%
- Cap: Liability capped at LIBOR of 0.50%
- Maximum Potential Payment: 2.25% of notional amount if LIBOR stays below 0.50%
Note: The filing does not provide specific values for revenue, profit, cash flow, margins, total debt, or liquidity positions. It focuses solely on the derivative transaction.
Material Changes and Unusual Items
This filing reports a specific hedging activity rather than a change in operating performance. The unusual item is the acquisition of these specific flooridor contracts designed to receive payments from a counterparty if LIBOR rates fall below specified thresholds during the defined terms.
Guidance, Outlook, and Risks
The filing contains no forward-looking guidance, management commentary on future earnings, or specific risk factors beyond the nature of the derivative contracts themselves. The text notes that the summary is qualified by the executed Confirmations of Trade, which will be filed as an exhibit to the Form 10-Q for the quarter ending September 30, 2009.
Investor Verification Checklist
- Verify the exact upfront costs paid for the two flooridors, as the specific dollar amount is not disclosed in this text.
- Review the executed Confirmations of Trade (to be filed in the Q3 2009 10-Q) for complete terms and conditions.
- Assess the Company's current exposure to LIBOR fluctuations and how these flooridors fit into the broader debt portfolio.
- Confirm the identity of the counterparties to these derivative agreements.