Business Context and Reporting Period
This Form 8-K, dated November 19, 2021, reports on Ashford Hospitality Trust, Inc. (AHT), a Maryland corporation. The filing details a Limited Waiver to the Company's Credit Agreement with Oaktree Capital Management, L.P., and the subsequent declaration of dividends on multiple series of preferred stock.
Key Financial Metrics and Obligations
- Accrued Preferred Dividends: Approximately $18.6 million in total accrued dividends covering periods from June 30, 2020, through September 30, 2021.
- PIK Principal Outstanding: Approximately $23.5 million under the Credit Agreement.
- Deferred Advisory Fees: Approximately $6.6 million owed to Ashford Inc.
- Liquidity Requirement: To declare dividends, Unrestricted Cash must exceed $100 million plus the aggregate principal of delayed draw term loans.
Material Changes and Transactions
On November 19, 2021, the Company secured a Limited Waiver from its lenders. This waiver temporarily suspends the negative covenant prohibiting Restricted Payments (dividends) on Preferred Stock, provided specific conditions are met. These conditions include the prepayment of all Pay-In-Kind (PIK) Principal and maintaining a minimum Unrestricted Cash balance. Consequently, the Board declared cash dividends for accrued amounts and the fourth quarter of 2021 for Series D, F, G, H, and I Preferred Stock.
Outlook, Management Commentary, and Risks
Management Intent: The Company intends to prepay the $23.5 million in PIK Principal prior to paying the declared preferred dividends. Following these payments, the Company plans to pay the $6.6 million in deferred advisory fees, as the conditions for fee subordination will be satisfied.
Risks and Contingencies: The filing highlights significant risks, including the ongoing impact of COVID-19, the timing and outcome of an SEC investigation, the ability to regain S-3 eligibility, and the capacity to repay or restructure debt. Forward-looking statements are subject to market volatility and capital availability.
Investor Verification Checklist
- Verify the Company's ability to raise or allocate the $23.5 million required to prepay PIK Principal.
- Confirm that Unrestricted Cash levels meet the $100 million threshold plus delayed draw term loans as of the payment date.
- Monitor the status of the SEC investigation and its potential impact on S-3 eligibility.
- Track the actual payment dates for the accrued dividends (December 10, 2021) and Q4 dividends (January 14, 2022).
- Assess the impact of the $6.6 million deferred advisory fee payment on near-term liquidity.