Selina Hospitality's board of directors has found the company can't avoid insolvency any longer.
In 6-K filing with the U.S. Securities and Exchange Commission, the company's board wrote that it "no longer has any reasonable prospects" of avoiding insolvency as it has exhausted all alternative options.
The company appointed Andrew Johnson, Samuel Ballinger and Ali Khaki of FTI Consulting as joint administrators, who will explore all options available, including a sales process of some or all of the operating subsidiaries and other assets. The joint administrators assumed management of the company's affairs, business and property as of July 22, the date of the filing. Selina expects to be delisted from the Nasdaq Stock Exchange for being out of compliance with listing requirements.
The London-based lifestyle and experience-driven hospitality brand Selina has been in financial distress for some time. It became a publicly traded company in October 2022 after announcing in December 2021 its plans to go public in a business combination with BOA Acquisition Corp., a publicly traded special purpose acquisition company. The merger was approved by BOA stockholders on Oct. 21, 2022, and valued the combined entity at $1.2 billion.
As of July, Selina's portfolio spans 22 countries across six continents.
In a June 2022 interview with HNN, Selina CEO and co-founder Rafael Museri spoke about the company's strategy to go public. He said it was time to go public to allow guests to become part of the company, and Selina would benefit from the inherent structure of public companies.
He said the process "forces the startup to become grown-up," and recognizes that "the public market will serve us better" as the company approaches growth opportunities.
In a July 18, 2024, 6-K filing, Selina reported to the SEC that Inter-American Investment Corp., known as IDB Invest, sent Selina and the other obligors under IDB's $50 million loan facility from Nov. 20, 2020, a default notice and reservation of rights letter. The notice regarded the failure to pay interest of $455,250.38 due on July 15, which amounted to default under the agreement.
The default allowed IDB to accelerate the outstanding amounts due under the loan facility, which had an outstanding principal amount of about $44.1 million as of July 15.
Selina reiterated from its July 2 announcement that it "has been facing severe cash flow and liquidity constraints and has an immediate and urgent need for further liquidity."
The company had been unable to secure additional investment or realizing assets. It had been exploring different options, including the sale of assets through a United Kingdom administration process.
"If the company is unable to secure financing to fund such a sales process, the company may be required to commence formal insolvency proceedings," according to the filing.
In that July 2 filing, Selina reported to the SEC a sale and purchase agreement with Osprey International, which was buying 42.9% interest in Selina Holding Australia, its holding company for its Australian business. Through this, Selina has four hotels: Selina Central Melbourne; Selina St. Kilda Melbourne; Selina Brisbane and Selina Magnetic Islands, which generated about $9.4 million in revenue and $2 million in unit level operating profit in 2023.
The reported purchase price for the hotels was about $3.5 million, $3.1 million net of taxes paid by Osprey, valuing the Australian business at about $12 million before about $3.7 million in debt to third-party lender Dorado Direct Investment.
In late May, Selina issued a news release explaining its response to a Nasdaq Stock Market notice informing the company its delinquency in filing its Form 20-F for full-year 2023 as required by Nasdaq's listing requirements. This followed Nasdaq's April notice the company faced being delisted because its closing bid price of ordinary shares fell below 10 cents for 10 consecutive trading days from April 3 to April 16. Selina had also received a letter in early September 2023 about being out of compliance with Nasdaq's listing rule by having its listed securities closing below $1 per ordinary share for 30 consecutive business days.
Selina had requested a hearing with the Nasdaq Hearings Panel, which was scheduled for June 4, 2024, which temporarily stayed the delisting.