SeattleGoldMiner

How Extended Stay America’s Bankruptcy Affects Ashford Hospitality

In a macro sense I agree with your "theme." There is no rationality to a 50% decline in AHT's stock as a function of the ESA Chapter 11 filing. However, in a micro sense I disagree with several of your "leanings."
1.) I don't think AHT will salvage one penny in the ESA Chapter 11. I know Chapter 11 very well and if their position, that far down in the stack is thrown any bone at all, it will be one that will not have any future value (i.e. an out of the money warrant for the Newco equity that would only have value if/when Newco's valuation made everyone else in the stack above them 100% whole...not likely.)
2.) I think that the RevPar numbers will continue to be horrendous for a protracted period of time (see USA Today for teleconference article) with implications for permanent change to property valuations in line with reduced property-based cash flows.
3.) AHT has done a sensational job of funds management and has performed extraordinarily well for shareholders. Its average cost of 3.37% due to its "hedges" and its pull down of its credit line and use of liquidity to shrink its common and preferred share base will allow it to salvage more value as a % of former value than any other lodging REIT. That said, one can be very concerned about what the share price might move to in the future. EBITDA in 2014 may not at all come close to the level it was at in 2007 even if Revpar begins to move up again. The reasons for this would be:
a.) A rational person will assume that the current enormous impact (and it IS enormous) of the hedging strategy will wear out after the hedges expire and that without a great crystal ball, a benign scenario would be "normal" cost of funds.
b.) That "normal" cost of funds is going to be higher than it is today for AHT both in nominal and relative terms as we are witnessing bank hardball on refis and new financings with terms way above what AHT is running. The clock starts ticking again for refi in 2011 for AHT.
c.) A permanently lower level of Revpar could also be part of the scenario with very muted recovery for both consumption expenditures and corporate marketing events.
Larry, if you have the expertise, or know someone who does, and can model what the cash flows look like through 2014 restoring "normal" average funding interest levels, assuming refis will ratchet up a bit with less leverage available, and then put a variety of Revpar and cash flow retention assumptions through that meat grinder (assuming current Preferred and Common share counts as I think most of the buybacks are over) then you can begin to assess what ranges of values are and which variables create the greatest EPS changes over that set of scenarios. I am sure the good folks at AHT try to have this kind of perspective, although I would hazard a guess that even they have not modeled this in as "tight" a way as an investor should.

GM Common Stock Is Worth More than You Think

You get NOTHING...NADA, ZILCH, ZIPPO, the big GOOSE EGG. 5 days after the judge bangs his gavel to confirm GM's reorganization and they "emerge" the old common stock will be cancelled with nothing given in return.


On May 31 06:27 PM NicoJones wrote:

> So what happens is you are still holding GM stocks after they are
> canceled? Do they convert to the new GM, or do you lose your money?
>

GM Common Stock Is Worth More than You Think

The headline was "GM COMMON STOCK worth more than you think" Now that your ignorance about Chapter 11 and Tax Loss utiizations were flamed at you and perhaps you had a chance to realize you had made one of the worst Seeking Alpha notes of all time, you come back on the board and try and weasel word your way out of this. You were WRONG. The reality is that GM COMMON STOCK IS WORTH ZERO. Period, end of story.


On May 31 08:45 AM Gerry Sullivan wrote:

> Wow, there are some angry people on Seeking Alpha. If you don't
> like what I write you should at least be civil.
>
> I purposely ran the article after the market closed on Friday and
> stated that I had no position in any GM securities. I traded the
> GRM bonds twice and the BGM bonds twice and all 4 trades were profitable.
> I recommended purchase of those bonds for speculators and if you
> followed my advice you made money.
>
> GM will continue to trade and I expect it will trade lower. I didn't
> suggest that anyone purchase the stock and I still don't suggest
> that anyone buy GM. I was merely pointing out that there might be
> some value that was being overlooked. If you check my previous posts
> you will see that I recommended that holders of GM common sell the
> stock and buy the cheapest bonds. As recently as last Tuesday you
> could sell 100 shares of GM common and buy more than 100 of the BGM
> $25 par bonds. BGM closed at $2.48, GM at 75 cents.
>
> GM bonds will continue to trade and may trade higher. Once GM files
> bankruptcy the symbols may change. Someone mentioned that they were
> short the bonds. That might get untidy as this works its way through
> the court system. I continue to believe that the bonds will be worth
> more than their closing prices on Friday. There could easily be
> a short squeeze on the listed bonds.
>
> I like the prospects for the "new GM" and think in time it will be
> a big winner.
>
> Disclosure: no positions in GM

GM Common Stock Is Worth More than You Think

1.) GM shares will continue to trade until the company EMERGES from Chapter 11.
In all likelihood they will be delisted by the NYSE sometime shortly after they file Chapter 11 and trade on the pink sheets.
2.) While in Chapter 11, whether the bondholders buy into the new deal or not, GM will continue to operate, almost as normal, while it begins to implement the changes that the government and consultants have suggested are necessary to perhaps be successful in the future.
3.) The Chapter 11 will take anywhere from 3 months to 18 months to be completely resolved and when it is resolved the company will EMERGE and ALL OF THE CURRENT SHARES WILL BE CANCELLED.
4.) There will be nothing given in return for the cancelled shares.
5.) If someone is short the stock there will be no need for them to "cover" their short position, only file copies of the reorganization plan with their broker and any margin held against the position will be released (this is called a terminal short.)
6.) There will be tax due for the profits on the short position, even if never formally covered by a trade. The profit will be deemed to have occurred on the day the company emerges and the shares are cancelled.
7.) Between now and then the stock will continue to trade and may spike up and down for a variety of reasons such as:
a.) People who have held for a long time figuring, "how much more can I lose" and thus NOT selling. The obvious answer is, since the stock WILL be cancelled, that they can lose whatever their stock is worth when they decide to NOT sell it.
b.) People who DO cover their short positions and are willing to forego the remaining drop to zero, so that they can free up their collateral margin, which will create some buying.
c.) Naive people who do not understand that what is happening to the company has no bearing any more on the value of the stock in the future. So even if sales fo up 30% while the company is in Chapter 11, the stock is still cancelled when they emerge. The reason for this is that until and unless the company can make all claims against it 100% whole (bondholders, secured creditors, trade creditors, union health fund etc.) Bankruptcy law does not allow for anything to common shareholders. In rare instances there is either enough in the company to leave something over for common shareholders (usually if a company files to avoid litigation) or to shorten the process (as they are currently trying to do with the bondholders) the shareholders are thrown a "bone" so they do not add more legal fees or delay things. That "bone"....if the creditors are not made whole, may not be more than an "out of the money" warrant to buy stock in the "new" company at a price which would make the creditors whole if the stock ever reached it and the creditors have taken stock for all or part of their claims.
d.) Hypesters and day traders who attempt to take advantage of a, b and c above in order to create a quick profit, or escape from an ill-advised position they took before the filing.
e.) Momentum copycats who say "Gee, the stock is rising, something must be happening." The response to that is to not believe your neighbor can really fly if you see him jumping off the roof!!

GM Common Stock Is Worth More than You Think

This is totally WRONG. You clearly do not understand what takes place in Chapter 11 and you clearly do not understand the utilization of tax losses. What a misleading and ignorant piece of dung.
They will not keep a shell. The existing stock will continue to trade while GM is in Chapter 11. 5 days after the judge bangs the gavel to confirm the reorg plan the current stock will be cancelled.