Morgans Hotel Group Secures Amendment to Eliminate Financial Covenant in Trust Preferred Securities
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Morgans Hotel Group Secures Amendment to Eliminate Financial Covenant in Trust Preferred Securities
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Category: Worldwide - Industry economy -
Figures / Studies
This is a press release selected by our editorial committee and published online for free on 2009-11-03
Morgans Hotel Group Co. (NASDAQ: MHGC) (“MHG”) today announced it has successfully secured an amendment to the indenture related to its trust preferred securities to permanently eliminate the sole financial covenant. In exchange for the permanent removal of the covenant, MHG paid a one-time fee of $2.0 million.
In August 2006, MHG issued $50.0 million of trust preferred securities in a private placement. The securities have a fixed interest rate of 8.68% per year for the first 10 years after which the interest rate will float at LIBOR plus 3.25%. The securities mature in 2036 and as a result of this amendment are redeemable by MHG at par at any time. In connection with these securities, MHG was required to maintain a certain EBITDA to interest coverage ratio, which has been eliminated as part of this amendment.
“This amendment is one of a series of recently announced financing and other transactions that strengthen our balance sheet, improve our liquidity and enhance our financial position going forward. We are proud of the expression of confidence from our lender groups and appreciate their support,” said Marc Gordon, President of Morgans Hotel Group.
In addition to this amendment to the trust preferred securities, over the last three months, MHG has added approximately $200 million of liquidity by issuing a $75 million preferred security and amending the terms of its line of credit to give MHG access it would not have otherwise had to credit under the line up to a maximum of $125 million. Further, MHG has entered into a structured transaction with the mezzanine lender on the Hudson hotel that management believes has the practical effect of extending the Hudson mezzanine loan by 3.25 years to October 2013.
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