The Company approved the pro rata rights offering because the proceeds are essential to retire the credit facility secured by Delano South Beach, which is a precondition for closing the transaction with Yucaipa. In addition, the rights offering is projected to raise $65 million of additional cash that will be used to fund general corporate purposes, including working capital, and growth through investment in Morgans' expanding pipeline of new hotel contracts.The rights offering is structured to ensure there is no inherent dilution to shareholders' ownership interests or voting power. The rights offering will be available pro rata to all of the Company's shareholders at $6 per share, a discount to the Company's closing stock price on April 8 th. Holders of the rights, which will be fully transferable, will also be entitled to subscribe for additional shares of common stock up to 50% of their basic pro-rata subscription amount, depending upon the number of rights that expire unexercised and certain other limitations. To ensure that the Company raises the full $100 million needed by the Company to fund working capital and growth, Yucaipa agreed to fully backstop the rights offering, at no fee, and only to the extent that the rights are not exercised by existing shareholders (including existing shareholders' right to subscribe for additional shares up to 50% of their basic pro-rata subscription). OTK had the opportunity to backstop a material portion of the $6 rights offering and it did not. The rights offering and transaction with Yucaipa is the result of a 15-month process by a special committee of the Company's Board established to review strategic alternatives.
Morgans Hotel Group Voluntarily Reschedules Rights Offering And Extends Closing Date
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