Hotel operator Ashford Trust shares jump on proxy recommendation

Ashford

28/09/2020 20:00

NEW YORK, Sept 28 (Reuters) - Shares of Ashford Hospitality
Trust jumped almost 30% on Monday after a proxy advisory firm
recommended shareholders of the troubled hotel operator approve,
"with caution," two proposals that would substantially dilute
their ownership.
    The rally in AHT  AHT.N , a real estate investment trust
whose shares had plunged almost 95% this year as of Friday,
comes as the industry's outlook has improved but hotel occupancy
remains low due to the still-unchecked coronavirus pandemic.
    An exchange offer for preferred stock in AHT  AHT.N  could
dilute legacy shareholders' stakes by up to 90.6%, said advisory
firm Institutional Shareholder Services on Friday.
    Rapidly eroding cash reserves, mounting debt and apparently
limited financing options have cast doubt on AHT unless the
hotel industry recovers, ISS said. The proposal could allow AHT,
which operates 116 hotels, to stave off bankruptcy, it said.
    "The proposals are therefore supportable, with caution," ISS
said. "A cautionary vote for both proposals is warranted."
    But ISS said that AHT had significantly underperformed peers
in recent years and reported losses in 2018 and 2019, ISS said. 
    Cygnus Capital, an Atlanta-based investor in distressed real
estate with a 7.8% stake in AHT, warns a Securities and Exchange
Commission investigation into related party transactions and
accounting policies at AHT should give shareholders pause.
    "We just believe there's a very clear conflict of interest
here," said Cygnus Chief Executive Christopher Swann, an
assessment ISS said is correct.
    AHT is managed by Ashford Inc  AINC.N , a related REIT known
as AINC whose chairman and chief executive, Monty Bennett, is
also AHT's chairman. The two companies also share executives. 
    Cygnus holds that AHT is being run to maximize AINC's
management fees and that the common owners running the two
companies have a greater economic interest in the survival of
AINC than they do in minimizing dilution at AHT. 
      

 (Reporting by Herbert Lash
Editing by Nick Zieminski)
 ((herb.lash@thomsonreuters.com; 1-646-223-6019; Reuters
Messaging: herb.lash.reuters.com@reuters.net))