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April 1, 2013 /PRNewswire/ -- Morgans Hotel Group Co. (NASDAQ: MHGC) ("Morgans" or the "Company"), the
New York-based hospitality management company, today announced a
$100 million rights offering to its stockholders and other equity holders at a subscription price of
$6.00 per share of common stock. The rights offering is being conducted in connection with the Company's recently announced transaction with The Yucaipa Companies ("
Yucaipa"), the culmination of a 15-month exploration process by a Special Committee of the Board to review strategic alternatives.
Yucaipa has agreed to backstop the rights offering at no-fee by purchasing, on the same terms, any and all shares not subscribed for in the rights offering.
The proceeds of the rights offering will be used to retire the credit facility secured by
Delano South Beach, which currently has
$35 million of outstanding obligations, and the remaining
$65 million will be used to fund expansion of the business and for general corporate purposes.
Under the terms of the rights offering, the Company will distribute at no charge to the holders of its common stock and other equity holders transferable rights to purchase up to an aggregate of 16,666,666 shares of its common stock. The Company will distribute to each such holder one transferable right for every share of common stock or membership unit, as applicable, owned on
April 11, 2013, the record date for the rights offering. Each right will entitle the holder to purchase approximately 0.50 shares of common stock at the subscription price of
$6.00 per share of common stock. The exact number of shares will be set forth in the prospectus for the rights offering. Holders of rights also will be entitled to subscribe for additional shares of common stock of up to 50% of their basic subscription amount, depending upon the number of rights that expire unexercised and subject to certain other limitations. Consummation of the rights offering is subject to the closing of the recently announced transaction with
Yucaipa and other customary closing conditions.
In connection with the rights offering,
Yucaipa has agreed, subject to certain terms and conditions, to purchase from the Company at the closing of the rights offering, at the subscription price, any and all shares not subscribed for in the offering.
Yucaipa will not receive a fee for this backstop arrangement.
The Company will apply to list the rights on the NASDAQ Global Market.