Braemar Hotels & Resorts Inc. filed its quarterly report on Form 10-Q, disclosing a net loss of $15,387,000 on $117,520,000 of total revenue for the three months ended March 31, 2020, compared to a net loss of $1,322,000 on $128,513,000 of total revenue for the same period in 2019.
At March 31, 2020, the Company had total assets of $1,802,515,000, total liabilities of $1,309,017,000, and $349,360,000 in total equity.
The Company disclosed that it has determined that there is substantial doubt about its ability to continue as a going concern within one year after the date the financial statements are issued.
The Company said, “As of March 31, 2020, the Company maintained unrestricted cash of US$141.8 million. All of the Company’s property-level debt is non-recourse. Although the Company was in compliance with all its debt covenants as of March 31, 2020, subsequent to March 31, 2020 the Company did not make at least one interest payment on nearly all of its mortgage and mezzanine loans, which constituted an “Event of Default” as such term is defined under the applicable loan documents. Further, the Company triggered an “Event of Default,” as defined under the secured revolving credit facility agreement as a result of the Company being in default on mortgage and mezzanine loans with an aggregate principal amount in excess of US$200 million.
“Pursuant to the terms of the applicable mortgage loan, such an Event of Default caused an automatic increase in the interest rate on its outstanding loan balance for the period such Event of Default remains outstanding. Following an Event of Default, the Company’s lenders can generally elect to accelerate all principal and accrued interest payments that remain outstanding under the applicable mortgage loan and foreclose on the applicable hotel properties that are security for such loans.
“Additionally, subsequent to March 31, 2020, the Company did not make rental payments under two ground leases that are paid monthly. The Company is actively negotiating the terms for forbearance agreements or waivers with its lenders and landlords. Based on these factors, the Company has determined that there is substantial doubt about the Company’s ability to continue as a going concern within one year after the date the financial statements are issued. U.S. generally accepted accounting principles requires that in making this determination, the Company cannot consider any remedies that are outside of the Company’s control and have not been fully implemented.
“As a result, the Company could not consider future potential fundraising activities, whether through equity or debt offerings, dispositions of hotel properties or the likelihood of obtaining forbearance agreements as we could not conclude they were probable of being effectively implemented. Any forbearance agreement will most likely lead to increased costs, increased interest rates, additional restrictive covenants and other possible lender protections.
“In addition to or in lieu of obtaining forbearance agreements, the Company could turn over the hotels securing the mortgage loans to the respective lenders.”
A copy of the Form 10-Q is available at: