Agreement Expected to Significantly Improve Cash Position, Access to Growth Capital, Increase Margins, and Future Cash Flows
LuxUrban Hotels Inc. (Nasdaq: LUXH) announced today that on May 21, 2023 it entered into an agreement with its pre-IPO investors that will eliminate an estimated $87.5million in Revenue Share payments in exchange for a one-time issuance of 6,740,000 shares of the Company’s common stock subject to an extended lock up agreement.
As a result of the agreement, the Company is increasing its EBITDA forecast for 2023 to $25 to $30 million from its previous estimate of $21 to $25 million. The Company is also initiating 2024 net rental revenue and EBITDA guidance of $220 to $240 Million and $48 to $60 million, respectively.
“This agreement closes the chapter related to our pre-IPO debt arrangements and, we believe, accelerates margin expansion removing a long-term drag on our financial results,” said Brian Ferdinand, Chairman and Chief Executive Officer. “We view this agreement as an accretive investment with the ability to deliver value in the near-term and over-time by significantly increasing future cash flows and profitability while enhancing our access to growth capital.”
The Company will issue the Agreement Shares to Greenle Partners LLC Series Alpha P.S and Greenle Partners LLC Series Beta P.S in exchange for the termination of any and all rights of Greenle to receive any future Revenue Share and any related payments with respect to any property or operations of the Company. These Revenue Share payments would have been payable by the Company to Greenle through December 31, 2038. The Agreement Shares will be initially unregistered and, following their registration, may only be sold at specified dates and amounts ending 2025. The Agreement Shares include a blocker provision which restricts Greenle’s beneficial ownership to 9.9% of the Company’s outstanding common stock. The issuance of the Agreement Shares is subject to, among other things, the approval of the Company’s shareholders at the next Annual Meeting.
“We are grateful for the early support provided by our pre-IPO lenders,” said Shanoop Kothari, President and Chief Financial Officer. “However, as we have matured as an organization and demonstrated the validity of the business model, the time is right to eliminate these legacy obligations. The elimination of these Revenue Share payments will allow us to direct cash towards growth, enhance our margins, and afford us the opportunity to design and implement a long-term capital allocation strategy that more accurately reflects the evolving profile of our Company.”
Mr. Kothari concluded, “We believe that the willingness of our pre-IPO lenders to accept shares with an extended lock-up in lieu of cash payments throughout the life of the selective leases reflects their confidence in our abilities and outlook.”