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MORGANS HOTEL GROUP CO. operates and owns or has an ownership interest in Morgans Royalton and Hudson in New York Delano and The Shore Club in Miami Mondrian in Los Angeles and Scottsdale Clift in San Francisco and Sanderson and St Martins Lane in London. MHG and an equity partner also own the Hard Rock Hotel & Casino in Las Vegas and related assets. MHG has other property transactions in various stages of completion including projects in Miami Beach Florida; Chicago Illinois; SoHo New York; Las Vegas Nevada; and Palm Springs California. Morgans Hotel Group Co. has a market cap of $103.8 million; its shares were traded at around $3.5 with and P/S ratio of 0.3. Highlight of Business Operations:Issuance of Preferred Securities and Real Estate Opportunity Fund. On October 15, 2009, we entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with Yucaipa American Alliance Fund II, L.P. and Yucaipa American Alliance (Parallel) Fund II, L.P. (collectively, the “Investors”). Under the Securities Purchase Agreement, we issued and sold to the Investors (i) 75,000 of our Series A Preferred Securities, $1,000 liquidation preference per share (the “Series A Preferred Securities”), and (ii) warrants to purchase 12,500,000 shares of our common stock at an exercise price of $6.00 per share.
In connection with the investment by the Investors, we paid to the Investors a commitment fee of $2.4 million and reimbursed the Investors for $600,000 of expenses.
Amendment to Hudson Mezzanine Loan. On October 14, 2009, we entered into an agreement with one of our lenders which holds, among other loans, the mezzanine loan on Hudson. Under the agreement, we paid an aggregate of $11.2 million to (i) reduce the principal balance of the mezzanine loan from $32.5 million to $26.5 million, (ii) acquire interests in $4.5 million of certain of our other debt obligations, (iii) pay fees, and (iv) obtain a forbearance from the mezzanine lender until October 12, 2013 from exercising any remedies resulting from a maturity default, subject only to maintaining certain interest rate caps and making an additional aggregate payment of $1.3 million to purchase additional interests in certain of our other debt obligations prior to October 11, 2011. We believe these transactions will have the practical effect of extending the Hudson mezzanine loan by three years and three months beyond its scheduled maturity of July 12, 2010. The mezzanine lender also has agreed to cooperate with us in our efforts to seek an extension of the $217 million Hudson mortgage loan, which is also set to mature on July 12, 2010, and to consent to certain refinancings and other modifications of the Hudson mortgage loan.
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