After months of struggling to get a handle on their high levels of debt in a historically low-demand environment, Ashford Hospitality Trust executives said they believe the company in a significantly better place in terms of their balance sheet and cost containment.
While demand remains depressed amid the ongoing COVID-19 pandemic, Ashford officials now estimate they have “two and a half to three years of runway” at current cash-burn rates.
Speaking during the company’s fourth quarter and full-year 2020 earnings call, Ashford Trust President and CEO J. Robison Hays said the company is “substantially complete with our debt forbearance efforts” and have recently secured “crucial strategic financings.”
During the fourth quarter, the company signed agreements for forbearance on many of its hotels, including $1.2 billion for a portfolio of 34 hotels, the $98 million mortgage for the Hilton Boston Back Bay, and four mortgage loans covering seven hotels worth $52 million. So far in the first quarter of 2021, the company has modified loans representing 25 hotels and $814 million.
During the earnings call, Hays noted there are some “small remaining loan pulls” that Ashford executives have not yet reached forbearance agreements for. However, many have informal agreements that have not yet been finalized.
The combined reductions in interest costs, along with other cost-saving measures, have brought the company’s monthly cash utilization down to a range of $18 million to $20 million, compared to $37 million a month spent in the second quarter of 2020, the early days of the pandemic.
The company also secured financing from Oaktree Capital Management to help fund ongoing operations. The company drew down $200 million at the initial closing of the three-year loan in January with the option to draw down another $250 million. Lincoln Park Capital has also committed to a $40 million stock purchase agreement with the company, adding further liquidity.
Hays said the company has also been successful in its efforts to convert preferred stock to common stock, converting roughly 30% of the company’s preferred stock in the quarter and issuing more than 38 million new shares of common stock.
The company hasn't seen much movement in asset sales, and during the quarter only sold the 60-key Le Meridien Chambers Minneapolis for $7.3 million in net proceeds in January.
Hays said all these moves combined give Ashford’s leadership team some flexibility to plan for the long term and make the most of the eventual travel rebound.
“The focus really has changed from liquidity to what is the balance sheet we want to have in the next three to five years,” he said. “It’s going to be via a combination of strategically selling some of our lower-quality assets over time, continuing with the preferred exchanges that we’re doing to grow our equity base, and it’s going to be opportunistically raising equity capital, as appropriate.”
Quarterly Performance
For the fourth quarter, Ashford posted a $70.5 million net loss, with a loss of $520.5 million for the full year. Adjusted earnings before interest, taxes, depreciation and amortization for real estate was -$23.1 million for the quarter and -$54.9 million for the year.
Revenue per available room was down 70.1% year over year in the fourth quarter to $35.70.
The company ended the quarter with $92.9 million in cash and cash equivalents with $74.4 million in restricted funds.
As of press time, Ashford’s stock was trading at $3.71 a share, down 83.4% year over year but up 43.2% since the start of 2021. The NYSE Composite Index was up 4.8% since the start of the year.