Oaktree Group Said Near $300 Million Watermark Lodging Wager
Oaktree Group Said Near $300 Million Watermark Lodging Wager
(Bloomberg) -- A group including Oaktree Capital is nearing a deal to provide at least $300 million to Watermark Lodging Trust, a hotel investment platform created from the recent merger of two closely held real estate investment trusts, according to people with knowledge of the matter.
The investment would be in the form of five-year payment-in-kind notes, yielding about 9%, said some of the people, who asked not to be identified because the talks are private. No deal has been finalized and it’s possible that terms could change.
A representative for Oaktree declined to comment. Watermark didn’t immediately respond to request for comment.
PIK Notes
Payment-in-kind notes, known as PIKs, are among the riskiest types of high-yield debt financing because they give issuers the option to pay interest with more debt. In making a wager involving PIK notes, investors are effectively betting that a cash-strapped company will be able to make good on a ballooning debt obligation when it matures.
The pandemic, which halted global travel, has been particularly hard on the hotel industry. Lodging companies have shuttered properties and dismissed thousands of workers. Industry analysts expect a long recovery as Americans slowly get comfortable traveling taking trips again.
Watermark had been seeking about $200 million in unsecured financing as it tries to weather the aftermath of the Covid-19 pandemic, Bloomberg reported last month. The company increased the size of the potential capital injection after fielding interest from investors, people familiar with the matter said.
Seeking Relief
Watermark, led by Chief Executive Officer Michael Medzigian, is working with advisory firm Hodges Ward Elliott to raise capital. The company owns about 30 hotels, including Ritz-Carlton properties in San Francisco, Fort Lauderdale and Key Biscayne, Florida, as well as Westin properties in Minneapolis and Pasadena, California.
The company said in a June 29 filing that it was exploring strategic financing transactions, which could include issuing preferred and common stock and taking on new debt. It also said it was actively marketing assets for sale, and that it could surrender certain properties to their lenders.
Last month, the company sold the Hutton Hotel in Nashville to a joint venture comprising BentallGreenOak, Flank Management LP and Geolo Capital.
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