Eagle Hospitality Properties Trust 8.25% Series A Cum PFD (EHPTP)

[Hank Moody]

What Happened?

I’m speculating on what happened here.

Apollo and Blackstone made a deal. Apollo knew there was no possibility of getting anything on their equity and they didn’t want any risk that their “bad boy” clause might trigger. Blackstone wanted to own these hotels on the cheap, at say, $132,000 per room (price of note purchase from FRBNY).

To give Blackstone what it wanted, Apollo gave a sweetheart forbearance agreement in September that made it impossible to maximize value within a short period, plus allowed Blackstone to take all the cash with the keys, and never need to go to court to perfect the foreclosure or legitimately auction the properties. As part of the deal, of course, Apollo eliminates the bad -boy risk.

So, despite all the analysis here on cap rates, room values, cash build, this was all a setup from the start with a fictitious attempt to sell the hotels to maximize value.

Am I warm or cold?