Tiny lodging REIT Sotherly Hotels (SOHO) is selling a new issue of baby bonds.
Of course Sotherly has 3 issues of cumulative preferred stock with suspended dividends (suspended in March, 2020) which can be seen here.
Obviously this is a dicey company at this time–the common shares are trading at $2.62/share.
This new issue has a maturity date in 2026 and will trade on the NASDAQ under ticker SOHOL.
It will be interesting to see the pricing on this issue and to see how well it is received by investors.
The new issue registration statement can be read here.
J was on top of this new issue.
I have been unloading some risk like FATBP and HDCIP I bought for a bounce and to capture a couple of monthly divs. Worked out nicely since I patiently had them for sale last week. Got filled at higher asks. Something like SOHO is the last thing I want to add. I have no desire to pay such close attention to a hotel reit that is on a poor foundation. I want higher quality even if I give up some yield. One bad covid something something could make this an absolute dumpster fire.
Sorry for being so CYNICAL but when I saw Tims post of “Sotherly has 3 issues with suspended dividends” I couldn’t help but think of Ole Willie Sutton the famous bank robber. When he was asked “Willie why did you rob all those banks” his answer was simply “Because thats where the money is”!!!!!! LOL PS I wouldn’t touch something like this with a 20 foot pole.
Pre-pandemic I thought of them as a somewhat too small company with somewhat too much debt, a dozen sunny locations with a tilt to the upscale / luxury end of lodging. Occupancy seems like it was off ~50% Y2Y in the pandemic but is trending up Q2Q.
I believe they took on some complicated or expensive debt to get through the pandemic. If they are paying it off or paying their down, this may be a good move for them. If it helps the company survive, it may even benefit the non-dividending preferreds in the long run. (Talking my book here.)
Looks like 3/12 of their properties will need refis in 2022.
I was surprised to see a little ray of sunshine in their prospectus. “We have concluded that the previously-reported substantial doubt of the Company’s ability to continue as a going concern has been alleviated.”
Just my opinion.
Curious to me — selling a new BB, while preferred divs are suspended. I’ve been wondering if they’re anywhere close to reinstating preferred dividends (I own a bit of SOHOB). Being cumulative, it could be worthwhile, but it could be a long wait. And now, with a BB, preferreds are one step lower in the food chain…
If this baby bond pays their loan shark loan it’s welcome news