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Morgans Hotel Inks Transformative Deal With Yucaipa Companies - Quick Facts

4/1/2013 6:44 AM ET

Morgans Hotel Group Co. (MHGC: Quote), the New York-based hospitality management company, reported signing agreements with The Yucaipa Companies to cancel Yucaipa's stakes in the company's convertible notes, preferred stock and stock warrants in exchange for the company's ownership interests in Delano South Beach and The Light Group.

The company said it would continue to operate Delano South Beach as per a long-term management deal. Further, the deals provide that the company would launch a $100 million rights offering available to all Morgans' shareholders, which Yucaipa would backstop at no-fee should the rights not be exercised in full. The combined transactions would reduce Morgans' debt and preferred stock obligations by $230 million, including the elimination of $113 million of debt maturing in 2014. Moreover, after retiring the credit facility secured by Delano South Beach, that currently has $35 million of outstanding obligations, the company anticipates that it would have $65 million cash remaining from the rights offering.

Pursuant to the agreements, Morgans would transfer its ownership interests in Delano South Beach and The Light Group to Yucaipa in return for the cancellation of the following securities held by Yucaipa $88 million principal amount of the company's 2.375% Senior Subordinated Convertible Notes due 2014; 75,000 shares of Series A Preferred Securities, with an accumulated preference amount of $99 million; and Warrants to buy 12.5 million shares at $6.00 per share until April 2017.

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by RTT Staff Writer

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