The Ashford Hospitality Trust announced Monday that it had secured at least $ 200 million in secured funding from OakTree Capital Management – a week after it warned investors that the country's largest hotel-focused real estate investment trust was entering the country potential bankruptcy candidate.
The Dallas-based company’s Oaktree’s funding commitment has a potential increase of $ 350 million, according to a registration filed with the Securities and Exchange Commission.
"We are encouraged by the vaccine news and believe that this strategic funding commitment provides Ashford Trust with substantial capital and liquidity to capitalize on the impending recovery in the hospitality industry," said J. Robison Hays, president and chief executive officer by Ashford Trust.
The proceeds from the Los Angeles-based credit investor's loan will add to Ashford's balance sheet and cash reserves, according to Ashford. It was issued for a term of three years with two extensions of one year.
According to research firm Trepp, Ashford is a sponsor of $ 1.74 billion commercial mortgage-backed securities in 18 bonds.
Ashford owns more than 100 luxury resort-style hotel properties – those that have suffered heavy losses due to the decline in global tourism and business travel due to the COVID-19 pandemic. Hotels are particularly vulnerable to the decline in short-term rental income, which is used to cover long-term operating and financing costs.
While the company has slashed costs since the second quarter (labor costs alone by nearly 71%) and eliminated perks like free food and drinks for guests, the cost of debt servicing is still nearly $ 17 million per month anticipate short-term estimates totaling up to $ 20 million in operating loss.
The company initially received a $ 68 million loan in May under the paycheck protection program set up as part of Congress' coronavirus relief effort. However, the proceeds were later returned to charity after criticism of the withdrawal of funds for small businesses.
The company stated in an SEC filed on Dec. 21 that it only had enough cash to support operations through early 2021, which required either a bridging loan, asset sales, or possible bankruptcy.
The company was aiming for $ 200 million in exchange for a 20 percent stake in the company.