Libor is currently zilch plus much more zilch. The loan is currently costing us a mint. It's probably in the neighborhood of what most Tea Party supporters would consider respectful. Guess; 8% plus some fraction I don't remember? Would love it to be so much more lower for the protection of sharolders. But, it is just business. AHT can afford it at the expense of shareholder value. Because we must remind shareholders that AHT is owned by many people and not just by Monty and Larry.
Libor is currently zilch plus a little bit. The loan is currently costing them less than the outstanding preferreds. It's probably in the neighborhood of what they were paying on the loan it replaced. Guess; 8% plus some fraction I don't remember? Would love it to be lower, but it's just business. AHT can afford it.
Thought it was on the high side as well, but because they mortgage each group of hotels based on the value and outlook for that group and there is no recourse to the company, it must be the best rate they could obtain for those assets.
One interesting thing they mentioned in the presentation was they difference in valuations in major centres/gateway cities versus the more mid-sized cities, so likely this had something to do with it as well.
Unfortunately for AHT their insistence on non recourse and their history of walking away does not go unnoticed by the banks. Thus they have to put more down and pay a higher interest rate. It is the price of flexibility. I am thankful they got this done before the JP Morgan mess.