Braemar Hotels & Resorts Inc. - Form 8-K Summary
Business Context and Reporting Period
This Current Report on Form 8-K was filed on November 13, 2018, by Braemar Hotels & Resorts Inc. (Braemar), a Maryland corporation and emerging growth company. The filing details the entry into a material definitive agreement to issue new preferred stock and the subsequent modification of security holder rights.
Key Financial Metrics and Transaction Details
- Transaction Type: Public offering of 8.25% Series D Cumulative Preferred Stock.
- Shares Issued: 1,600,000 shares (Firm Shares) with an option for an additional 240,000 shares (Over-Allotment Option).
- Price per Share: $25.00.
- Net Proceeds: Approximately $38.6 million after underwriting discounts, commissions, and estimated offering expenses.
- Dividend Rate: 8.25% annually ($2.0625 per share), payable quarterly in arrears.
- First Dividend Payment: January 15, 2019.
- Closing Date: Scheduled for November 20, 2018.
Material Changes and Use of Proceeds
The primary material change is the creation of a new class of preferred stock. The net proceeds from the offering are intended to finance the acquisition of the 170-room Ritz-Carlton Lake Tahoe in Truckee, California. If this acquisition does not close, the proceeds will be used for general corporate purposes, including debt repayment, future hotel investments, capital expenditures, and working capital.
Outlook, Risks, and Security Terms
- Seniority: The Series D Preferred Stock ranks senior to common stock and future junior securities, on parity with existing preferred stock (including the 5.50% Series B), and junior to all existing and future indebtedness.
- Redemption: The Company may redeem the stock on or after November 20, 2023, at $25.00 per share plus accrued dividends. Early redemption is permitted in the event of a Change of Control.
- Conversion Rights: Upon a Change of Control, holders may convert shares into common stock based on a formula involving the liquidation preference and common stock price, subject to a cap of 5.12295 shares per preferred share, unless the Company elects to redeem the stock first.
- Risks: The obligations of the underwriters are subject to customary conditions, including legal approval. The filing does not provide specific data on current revenue, profit, or liquidity metrics outside of the transaction proceeds.
Key Facts for Investor Verification
- Verify the closing of the Ritz-Carlton Lake Tahoe acquisition to confirm the primary use of the $38.6 million in proceeds.
- Monitor the exercise of the 240,000 share Over-Allotment Option by underwriters within 30 days of the agreement date.
- Review the impact of the new 8.25% dividend obligation on the Company's future cash flow and liquidity.
- Confirm the final terms of the Articles Supplementary filed with the Maryland State Department of Assessments and Taxation.