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Ashford Hospitality Trust, Inc. Message Board

  • bsoren29 bsoren29 Sep 23, 2011 11:04 AM Flag

    AHT and Leverage

    Any thoughts about how great is the risk that with a economic downturn AHT will not be able to hold onto their asset and refinance their loans as they come due?

    I had been comforted that the debt maturities the next few years are not that great, but at $6 per share others appear to have indentified this as a major risk/concern.

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    • I believe AHT will have no difficulty whatsoever refinancing the $200M this year. I think they have that much in cash. In fact, the 7M share offering for $100M was done in part to provide leverage wrt the refinances negotiations. The hotel performance for the current 3Q has been very good (+7% revpar) so there is extra cash. Notable, AHT gave back 3 hotels during a much more catastrophic 2008 than current, Chicago airport, ?Manchestor, and Dearborn. There are no hotels in that category in the legacy portfolio. Wrt the highland portfolio, that remains to be seen. But, still don't see that type of problem. AHT handles bad times so well you almost hate to see good times. That was a stretch, wasn't it.

    • BTW, the slideshow from the intestor presention they just made (the SEC filing just hit their website), shows exactly how many shares were purchased and issued by quarter the past 4 years.

    • I don't know the rules on that, but you have to imagine they can at the bare minimum repurchase 7 Million shares without a problem as they issued that many new shares in the summer.

      They have the option to use the $200M to purchase the preffered shares too, but given they are trading so close to par, I can't imagine the company doing that.

      I thought it was interesting that the approval also specifically mentioned re-purchasing their own debt. Since we know some of the individual hotels (or groups of hotels encumbered by the same loan), have loan to value ratios that are out of line from a lender's prospective, that brings some interesting scenerios for AHT to leverage that into gains - they might also have some lenders that need liquidity and would accept less than par for an early payoff.

    • What are the rules for insider purchases (? max 10%). As a group insiders already own 20%, and most of that probably came from the huge buyback. Are you required to sell shares if your % goes beyond 10 due to buybacks.
      Good luck, jtaylor

    • I'm doing this from memory as I started buying the stock in 2008. But, at the end of 2008, they rolled over their credit lines and one of the conditions of the new revolving line was that they had to stop paying a common dividend (they only re-instated it earlier this year). Obviously, the banks wanted the company to stay as liquid as possible through the recession. Anyway, the banks neglected to restrict them from using capital to buy-back shares. They were already buying back small amounts earlier in 2008 while the price was dropping, but after the credit line was announced and they suspended the common dividend they announced a huge stock buy-back program (that is why I suspected the same would occur today). During 2009 they purchased just about the max number of shares they could get every quarter and did the same into 2010. They re-purchased a ton of shares between $1 and $4 as the price was supressed for some time. To answer your question, the stock price was gradually rising as they were purchasing the shares in volume, but the market was also improving and other factors were at play.

      The way I see it, since they already eliminated half the outstanding shares, buying shares today at say $7 is just as an appealing to the company as buying shares at $3.50 back in '08/'09. The biggest difference is that REVPAR is trending up now and not down. I susupect they'll strike lightening in a bottle twice, and they'll repuchase a bunch of shares under $10 this year and will be laughing all the way to the bank when the price per share hits a new high next year, but I'm an optimist.

    • rjmonski Sep 27, 2011 8:07 PM Flag

      might be good to examine when they announced buybacks in the past and how much lower the stock went despite their buying back.

    • I only called for a $100M buy back yesterday. $200M is every better (they had over $150M in cash at the end of Q2 so they have the immediate capicity). Considering they sold 7 Million shares for $12.50 back in June, this is going to end well for the longs.

    • << I cant understand why a lender would agree to non-recourse debt.>>

      That's an easy one.

      The lender gets slightly higher interest rate and AHT gets flexibility.

    • There are a lot of frightened investors out there. IMHO a lot of the selling has nothing to do with AHT fundamentals.

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