Ashford Hospitality Trust is in hot water again.
In August, Ashford Hospitality Trust affiliates were at the center of an investigation by the U.S. Securities and Exchange Commission, examining the biggest recipients of federal bailout money originally intended for small businesses. At that time — following criticism — Ashford CEO and Chairman Monty Bennett said his companies would return the money. (Ashford companies received around US$68 million in federal loans at that time, according to a Wall Street Journal analysis).
Now, independent proxy advisory firm Institutional Shareholder Services has released a recommendation that Ashford Trust shareholders vote in favor of two proposals at a special meeting on October 6. The approval of both proposals is necessary to complete the company’s proposed offers to exchange any and all shares of its preferred stock, as well as avoiding potential bankruptcy.
In its September 25 recommendation to shareholders, ISS pointed to the risk created by COVID-19 and the benefit of the proposals enabling the completion of the exchange offers, saying: “…The company has a rapidly decreasing cash reserve, has a mounting debt, and appears to have limited options for financing, which have created doubt about its ability to continue as a going concern absent an industry recovery… The proposal is expected to simplify the capital structure and remove the debt overhang, allowing the company to stave off bankruptcy.”
Ashford Trust commented, “ISS recognizes the drastic impact that COVID-19 has had on the hotel industry and the company, and the uncertainty of the timeline for a recovery in making its recommendation that shareholders vote ‘for’ the two proposals at the upcoming special meeting…A failure to complete the exchange offers may hasten a path to insolvency, which we believe will prevent participation in a long-term recovery, and potentially lead to a bankruptcy or liquidation event with no recovery for common shareholders.”