Morgans Group Announces Hard Rock JV Settlement Agreement
Company eliminates approximately $160 million from its adjusted debt
March 2, 2011 - Morgans Hotel Group Co. (Nasdaq: MHGC) announced today that the Hard Rock joint venture, in which the company holds a minority interest, has reached a settlement agreement with its lenders effective March 1, 2011. Pursuant to the terms of the settlement, the Hard Rock joint venture's equity interests in the Hard Rock Hotel & Casino in Las Vegas have been transferred to the first mezzanine lender and MHG's management agreement has been terminated.
Fred Kleisner, Chief Executive Officer of Morgans, said, "The Las Vegas market has faced significant headwinds since 2008 and as a result we consistently reduced our equity interest in the Hard Rock JV following our initial investment. This settlement agreement is the final step for Morgans to completely exit the Hard Rock investment and increase our focus on an asset light strategy that further builds our Morgans brands in growing markets."
With this agreement, MHG has been released from any liability for the Hard Rock debt (which has been carried on MHG's books as a component of investments in unconsolidated joint ventures at approximately $160 million), and from all of its guarantee obligations with regard to this property. As a result of the settlement, MHG will also no longer be subject to gaming regulations which previously imposed compliance costs and certain filing and suitability requirements on our stockholders over certain ownership levels, among other things. While the conclusion of the Hard Rock relationship will reduce MHG's management fees in the short term, MHG has been focused on its existing brands such as Delano and Mondrian and has been successful in signing new and more secure contracts. MHG recently announced the opening of the Mondrian in SoHo and the signing of four new Morgans Hotel Group branded hotel management agreements including two for new Delano hotels.
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