UNITED STATES
SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 1, 2011
Morgans Hotel Group
Co.
(Exact name of registrant as
specified in its charter)
| Delaware | 001-33738 | 16-1736884 | ||
| (State or other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
| 475 Tenth Avenue New York, NY |
10018 | |
| (Address of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number, including area code: (212) 277-4100
| Not
applicable |
| (Former name or former address if changed since last report.) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
o Soliciting material pursuant
to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule
14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule
13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 8.01. Other Events.
Hard Rock Settlement Agreement
As previously disclosed in the Current Report on Form 8-K filed by Morgans Hotel Group Co. (the “Company”) on February 10, 2011, Hard Rock Hotel Holdings, LLC, a joint venture through which we held a minority interest in the Hard Rock Hotel & Casino in Las Vegas, Vegas HR Private Limited (the “Mortgage Lender”), Brookfield Financial, LLC – Series B (the “First Mezzanine Lender”), NRFC HRH Holdings, LLC (the “Second Mezzanine Lender”), Morgans Group LLC, the Company and certain affiliates of DLJ Merchant Banking Partners have been engaged in negotiations to resolve the disputes among them and all matters relating to the Hard Rock Hotel & Casino and related loans and guaranties. Additionally, the Company and the other interested parties have similarly been engaged in negotiations concerning the Hard Rock Hotel & Casino with Hard Rock Mezz Holdings LLC (the “Third Mezzanine Lender”). As a result of such discussions, the parties have entered into a comprehensive settlement, effective March 1, 2011, providing, among other things, for the following:
| • | release of the Company’s non-recourse carve-out guaranties with respect to the loans made by Mortgage Lender, First Mezzanine Lender, Second Mezzanine Lender and Third Mezzanine Lender to the direct and indirect owners of the Hard Rock Hotel & Casino; |
| • | termination of the management agreement pursuant to which Morgans Hotel Group Management LLC, a subsidiary of the Company, managed the Hard Rock Hotel & Casino; |
| • | the transfer by Hard Rock Hotel Holdings, LLC to an affiliate of the First Mezzanine Lender of 100% of the indirect equity interests in the Hard Rock Hotel & Casino; and |
| • | certain payments to or for the benefit of the Mortgage Lender, the First Mezzanine Lender, the Second Mezzanine Lender, the Third Mezzanine Lender and the Company. The net payment by the Company was approximately $3.7 million. |
As a result of the settlement, the Company will no longer be subject to Nevada gaming regulations, after completion of certain gaming de-registration procedures.
A copy of the Company’s press release announcing the Hard Rock settlement agreement is furnished as Exhibit 99.1 to this Current Report on Form 8-K. The information furnished in Exhibit 99.1 shall not be deemed “filed” with the Securities Exchange Commission nor incorporated by reference in any registration statement filed by the Company under the Securities Act of 1933, as amended.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
The exhibit contained in this current report on Form 8-K shall not be deemed “filed” with the Securities and Exchange Commission nor incorporated by reference in any registration statement filed by the Company under the Securities Act of 1933, as amended.
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99.1
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Press Release dated March 2, 2011 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
MORGANS HOTEL GROUP CO.
Date:
March 3, 2011
By: /s/ Richard
Szymanski
Richard Szymanski
Chief Financial
Officer
EXHIBIT INDEX
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99.1
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Press Release dated March 2, 2011 |
Exhibit 99.1
MORGANS HOTEL GROUP ANNOUNCES HARD ROCK JOINT VENTURE SETTLEMENT AGREEMENT
Company eliminates approximately $160 million from its adjusted debt
NEW YORK – March 2, 2011 – Morgans Hotel Group Co. (NASDAQ: MHGC) (“Morgans”) 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.
About Morgans Hotel Group
Morgans Hotel Group Co. (NASDAQ: MHGC) is widely credited as the creator of the first “boutique” hotel and a continuing leader of the hotel industry’s boutique sector. Morgans Hotel Group operates and owns, or has an ownership interest in, Morgans, Royalton and Hudson in New York, Delano and Shore Club in South Beach, Mondrian in Los Angeles, South Beach and New York, Clift in San Francisco, Ames in Boston, and Sanderson and St Martins Lane in London. Morgans Hotel Group also manages hotels in Isla Verde, Puerto Rico and Playa del Carmen, Mexico. Morgans Hotel Group has other property transactions in various stages of completion including a Delano in Cabo San Lucas, Mexico, a Delano in Turkey, a Mondrian in Doha, Qatar and a hotel in New York to be branded with one of MHG’s existing brands. For more information please visit www.morganshotelgroup.com.
Forward-Looking and Cautionary Statements
This press release may contain certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements relate to, among other things, the operating performance of our investments and financing needs and prediction of certain future events. Forward-looking statements are generally identifiable by use of forward-looking terminology such as “may,” “expect,” “anticipate,” “estimate” “believe,” “project,” or other similar words or expressions. These forward-looking statements reflect our current views about future events and are subject to risks, uncertainties, assumptions and changes in circumstances that may cause our actual results or other future events to differ materially from those expressed in any forward-looking statement. Important risks and factors that could cause our actual results to differ materially from those expressed in any forward-looking statements include, but are not limited to, the need for lender approval of any amendments to our loan agreements, economic, business, competitive market and regulatory conditions such as: a sustained downturn in economic and market conditions, particularly levels of spending in the business, travel and leisure industries; continued tightness in the global credit markets; general volatility of the capital markets and our ability to access the capital markets; our ability to refinance our current outstanding debt and to repay outstanding debt as such debt matures; our ability to protect the value of our name, image and brands and our intellectual property; risks related to natural disasters, such as earthquakes, volcanoes and hurricanes; hostilities, including future terrorist attacks, or fear of hostilities that affect travel; and other risk factors discussed in MHG’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009, Quarterly Reports on form 10-Q for the quarters ended June 30, 2010 and September 30, 2010 and other documents filed by MHG with the Securities and Exchange Commission from time to time. All forward-looking statements in this press release are made as of the date hereof, based upon information known to management as of the date hereof, and MHG assumes no obligations to update or revise any of its forward-looking statements even if experience or future changes show that indicated results or events will not be realized.
Contacts
Jennifer Foley
Vice President of Public Relations, Morgans Hotel Group
212.277.4166
jennifer.foley@morganshotelgroup.com