Shares of Ashford Hospitality Trust Inc (AHT.N) plunged 22 percent on Tuesday hurt by mounting problems for the company's hotel lending portfolio after U.S. hotel chain Extended Stay Hotels filed Chapter 11.
Extended Stay filed for Chapter 11 bankruptcy protection on Monday about two years after Lightstone Group LLC purchased the 680-property hotel chain. Lightstone borrowed $7.4 billion from a number of lenders including Ashford to buy the chain from private-equity firm Blackstone Group LP.
Extended Stay's bankruptcy filing on Monday means Ashford's investment will be worth little, if anything, under the most likely scenario, Baird analyst David Loeb wrote in a research note.
Ashford owns a $164 million note in a tranche Extended Stay's mezzanine debt. Mezzanine debt is often used to finance buyouts and ranks holders ahead of equity investors in the event of a bankruptcy.
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Source - Reuters
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