January 13, 2006
Mail Stop 4561
Richard Szymanski
Chief Financial Officer
Morgans Hotel Group Co.
475 Tenth Avenue
New York, NY 10018
Re: Morgans Hotel Group Co.
Second Amendment to Registration Statement on Form S-1
Filed January 3, 2005
File No. 333-129277
Dear Mr. Szymanski:
We have reviewed your filing and have the following
comments.
Where indicated, we think you should revise your document in
response
to these comments. If you disagree, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
information so we may better understand your disclosure. After
reviewing this information, we may raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
General
1. Please note that we are still considering the issues raised in
prior comment 30 related to FIN 46(R). Please note that we may
include additional comments on these issues at a later date.
2. We note your response to prior comment 1. It appears that your
formation transactions provide contributors with relative stakes
in
units to be issued to Morgans Hotel Group LLC by Morgans Group
LLC,
but that the number of units to be issued (and thus the percentage
of
the company to be retained by the contributors) will not be
determined until the time the offering is priced. Because you
have
not yet fixed a material term of the private placement, it appears
that the formation transactions were not completed before you
filed
the registration statement. Accordingly, you may not rely on Rule
152 to avoid integration. Please provide us with an alternative
analysis explaining why the formation transactions should not be
integrated with this offering. If integration is warranted,
please
tell us why the transactions do not constitute a roll-up within
the
meaning of Item 901 of Regulation S-K. In addition, please
provide
us with your analysis of any contingent liability that may arise
as a
result of integration.
Summary
Formation and Structuring Transactions, page 5
3. Please revise your disclosure to include the information
contained
in your response to prior comment 2.
Risks Relating to the Offering and Our Common Stock, page 31
If a significant number of shares..., page 32
4. Here or in a separate risk factor please discuss the risk of
dilution and selling pressure caused by issuances under your stock
compensation plans. Please quantify the number of shares that
could
be issued under these plans. Also, please make it clear in this
risk
factor that shares issued in your directed share program are not
subject to lockup.
Formation and Structuring Transactions, page 36
Accounting Treatment, page 41
5. You note in your response to comment 10 and in your filing on
page
41 that you accounted for the contribution of MHG Management
Company
to Morgans Group LLC at historical cost, however you also note in
your filing on page six that the transaction was based on a value
of
$20 million which reflected management`s estimate of the fair
market
value of MHG Management Company. Please clarify and reconcile the
difference between these statements.
Use of Proceeds, page 42
6. If you intend to rely on funds other than proceeds to complete
your purchase of the James hotel, please provide the disclosure
required by instruction 3 to item 504 of Regulation S-K.
Management`s Discussion and Analysis of Financial Condition...,
page
50
Liquidity and Capital Resources, page 66
7. Please expand your discussion regarding the effect that the
expected acquisitions of the James Hotel Scottsdale and the
property
across Collins Avenue from Delano will have on your liquidity and
capital resources. Please see Item 303(a)(1) and (2) and also
Section IV of Release 33-8350 Commission Guidance Regarding
Management`s Discussion and Analysis of Financial Condition and
Results of Operations for reference.
Formation and Structuring Transactions, page 36
8. Please explain briefly the purpose served by MMRDH Parent
Holding
Company LLC. It appears that this entity holds the debt of
Morgans
Hotel Group LLC.
Management
Executive Compensation, page 117
9. Please provide footnote disclosure describing the information
contained in the columns entitled "other annual compensation" and
"long-term compensation awards." If these columns do not include
the
value of LTIP units to be distributed to your executives, as
described on page 119, please revise accordingly.
Employment Agreements, page 117
10. Please discuss in detail the non-competition terms contained
in
your employment agreements. Also, please file these agreements as
exhibits to your registration statements.
Principal and Selling Stockholders, page 130
11. Please identify your other selling stockholders or tell us why
you are unable to do so at this time.
Financial Statements
Note 7 - Commitments and Contingencies
Construction Settlement, page F-21
12. We note in your response to comment 34 that the $10 million
settlement amount that you recorded in "property and equipment" in
2002 was for a construction related lawsuit that comprised of a
dispute with a general contractor over the cost of construction.
Please tell us why you believe that the difference between the
original liability and the final payoff amount of approximately
$2.2
million should be treated as an income producing transaction
rather
than an adjustment to the previously capitalized amount in
"property
and equipment."
Information Not Required in Prospectus
Item 15. Recent Sales of Unregistered Securities
13. We note your response to prior comments 7 and 36 and reissue
the
comment seeking your analysis of the exemption applicable to the
issuance of Morgans Group LLC of units in exchange for the
contribution of initial properties by Morgans Hotel Group LLC. As
noted in our prior comments, the mere fact that Morgans Group LLC
was
a wholly-owned subsidiary of the contributing entity at the time
of
transfer does not preclude us from determining that a sale has
occurred for purposes of Section 5 where the asset transfer and
subsequent issuance of membership units are integral steps in a
public offering.
Exhibit 5.1 - Draft Legal Opinion
14. We note your response to prior comment 38. As revised,
counsel`s
opinion is still conditioned upon the board`s approval of the
issuance and sale of the securities. If the issuance and sale are
not approved by the board of directors, counsel cannot opine that
the
securities have been validly issued. Counsel must provide an
unqualified opinion that the securities have been or will be
validly
issued. Please provide a revised opinion that omits the reference
to
approval by the company`s board of directors.
As appropriate, please amend your registration statement in
response to our comments. You may wish to provide us with marked
copies of the amendment to expedite our review. Please furnish a
cover letter with your amendments that keys your responses to our
comments and provides any requested information. Detailed cover
letters greatly facilitate our review. Please understand that we
may
have additional comments after reviewing your amendment and
responses
to our comments.
We will consider a written request for acceleration of the
effective date of the registration statement as a confirmation of
the
fact that those requesting acceleration are aware of their
respective
responsibilities under the Securities Act of 1933 and the
Securities
Exchange Act of 1934 as they relate to the above registration
statement. We will act on the request and, pursuant to delegated
authority, grant acceleration of the effective date.
We direct your attention to Rules 460 and 461 regarding
requesting acceleration of a registration statement. Please allow
adequate time after the filing of any amendments for further
review
before submitting a request for acceleration. Please provide this
request at least two business days in advance of the requested
effective date.
You may contact Jessica Barberich at 202-551-3782 or Daniel
Gordon, Accounting Branch Chief, at 202-551-3486 if you have
questions regarding comments on the financial statements and
related
matters. Please contact Geoffrey Ossias at 202-551-3404 or me at
202-551-3780 with any other questions.
Sincerely,
Karen J. Garnett
Assistant Director
cc: Robert W. Downes (via facsimile)
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Richard Szymanski
Morgans Hotel Group Co.
January 13, 2006
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