Registration No. 333-102576
Rule 424(b)(3) Prospectus
PROSPECTUS
14,403,300 Class A Common Shares
Orient-Express Hotels Ltd.
Sea Containers Ltd. may offer and sell from time to time up to
14,403,300 class A common shares of Orient-Express Hotels Ltd. These shares
consist of 11,943,901 shares currently outstanding and 2,459,399 shares which
would be issued upon conversion of class B common shares of Orient-Express
Hotels which Sea Containers owns. Orient-Express Hotels will receive no part of
the proceeds from the sale of these shares by Sea Containers. Sea Containers
will bear all the costs, expenses and fees incident to its offer and sale of the
class A common shares.
The class A common shares of Orient-Express Hotels are listed on the
New York Stock Exchange under the symbol OEH. On January 16, 2004, the last
reported sale price of a class A common share for New York Stock Exchange
composite transactions was $19.01.
Sea Containers has informed Orient-Express Hotels that Sea Containers
may sell the class A common shares from time to time in ordinary brokers'
transactions at then current market prices, or in other transactions at
negotiated prices. Sea Containers may effect these transactions through or with
brokers or dealers who may receive compensation in the form of commissions or
discounts.
Orient-Express Hotels maintains its registered office at 22 Victoria
Street, Hamilton HM 12, Bermuda, telephone 441-295-2244. Its main service
subsidiary in the United Kingdom is Orient-Express Services Ltd. located at Sea
Containers House, 20 Upper Ground, London SE1 9PF, England, telephone
011-44-20-7805-5060, and its main United States subsidiary -- Orient-Express
Hotels Inc. -- has offices at 1155 Avenue of the Americas, New York, New York
10036, telephone 212-302-5055.
Orient-Express Hotels' bye-laws provide that its board of directors
cannot declare a cash dividend on either of its class A or class B common shares
without at the same time declaring an equal cash dividend on the other class of
common shares. In general, holders of class A common shares and class B common
shares vote together as a single class on all matters submitted to a vote of
Orient-Express Hotels' shareholders, with holders of class B common shares
having one vote per share and holders of class A common shares having one-tenth
of one vote per share. Each class B common share is convertible at any time into
one class A common share. In all other material respects, the class A common
shares and class B common shares are identical and are treated as a single class
of common shares. See "Description of the Common Shares."
You should carefully consider the risk factors beginning on page 3
before you invest in the class A common shares.
None of the Securities and Exchange Commission, any state securities
commission or any Bermuda regulatory authority has approved or disapproved of
the class A common shares being offered by this prospectus, or determined if
this prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is January 20, 2004.
This prospectus also relates to 14,403,300 rights to purchase
Orient-Express Hotels' series A junior participating preferred shares. These
rights are not currently exercisable and are attached to and transferable only
with the class A common shares sold in this offering. See "Description of the
Common Shares - Preferred Share Purchase Rights."
You should rely on the information contained or incorporated by
reference in this prospectus. We have not authorized any other person to provide
you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not making an offer
to sell these securities in any jurisdiction where the offer or sale is not
permitted. You should assume that the information appearing in this prospectus
is accurate only as of the date on the front cover of this prospectus. Our
business, financial condition, results of operations and prospects may have
changed since that date.
TABLE OF CONTENTS
Page no.
--------
RISK FACTORS.................................................................3
Risks Relating to Our Business......................................3
Risks Relating to Our Relationship with Sea Containers Ltd..........9
Other Risks........................................................10
FORWARD-LOOKING STATEMENTS..................................................12
DESCRIPTION OF THE COMMON SHARES............................................13
Dividend Rights....................................................13
Voting Rights......................................................13
Preferred Share Purchase Rights....................................15
Liquidation Rights.................................................17
Conversion Rights..................................................17
Miscellaneous......................................................17
SELLING SHAREHOLDER.........................................................17
PLAN OF DISTRIBUTION........................................................18
AUTHORIZED REPRESENTATIVE...................................................20
LEGAL MATTERS...............................................................20
EXPERTS.....................................................................20
WHERE YOU CAN FIND MORE INFORMATION.........................................21
2
RISK FACTORS
A prospective purchaser of class A common shares should carefully
consider the risks described below and the other information contained in or
incorporated by reference in this prospectus before making a decision to
purchase class A common shares.
If any of these risk events occurs, our business, prospects, financial
condition, results of operations or cash flows could be materially adversely
affected. In such case, the market price of the class A common shares could
decline.
This prospectus, including the documents incorporated in it by
reference, also contains forward-looking statements that involve risks and
uncertainties. We refer you to "Forward-Looking Statements" in this prospectus.
Our actual results could differ materially from those anticipated in these
forward-looking statements as a result of certain factors, including the risks
described below and elsewhere in this prospectus.
Risks Relating to Our Business
The operations of Orient-Express Hotels are subject to adverse factors generally
encountered in the hospitality industry.
Besides the specific conditions discussed in the risk factors below,
these factors include
o cyclical downturns arising from changes in general and local
economic conditions,
o dependence on varying levels of tourism, business travel and
corporate entertainment,
o rising or falling disposable income of consumers and the
traveling public,
o changes in popular travel patterns,
o competition from other hotels and leisure time activities,
o periodic local oversupply of guest accommodation, which may
adversely affect occupancy rates and actual room rates achieved,
o increases in operating costs due to inflation and other factors
which may not be offset by increased revenues,
o regional and local economic and political conditions affecting
market demand, including recessions, civil disorder and acts of
terrorism,
o foreign exchange rate movements,
3
o adverse weather conditions or destructive forces like fire or
flooding, and
o seasonality, in that many of our hotels and tourist trains are
located in the northern hemisphere where they operate at low
revenue or close during the winter months.
The effect of these factors varies among our hotels and other
properties because of their geographic diversity. The recent SARS epidemic in
Asia, for example, caused a reduction in passenger bookings on the tourist train
of Orient-Express Hotels operating between Bangkok and Singapore and had a
negative impact on travel to Australia and Tahiti. Although the SARS outbreak
has been contained, it is possible that the disease could re-emerge. The
occurrence of this or a similar event may have a negative impact on
Orient-Express Hotels' operations.
In particular, as a result of terrorist attacks in the United States on
September 11, 2001 and the subsequent military actions in Afghanistan and Iraq,
international, regional and even domestic travel has been disrupted. Demand for
most of Orient-Express Hotels' properties declined substantially in the latter
part of 2001, and the effects of the disruption are continuing to be felt. For
example, American leisure travelers seem more reluctant than in the past to go
abroad, and the booking lead-times by guests, travel agents and tour operators
at our properties have shortened. Further acts of terrorism or possible military
action, could further reduce leisure and business travel.
The hospitality industry is highly competitive, both for acquisitions of new
hotels and restaurants and for customers.
Orient-Express Hotels competes for hotel and restaurant acquisition
opportunities with others who have substantially greater financial resources
than it does. They may be prepared to accept a higher level of financial risk
than Orient-Express Hotels can prudently manage. This competition may have the
effect of reducing the number of suitable investment opportunities offered to
Orient-Express Hotels and increasing its acquisition costs by enhancing the
bargaining power of property owners seeking to sell or to enter into management
agreements.
Some of Orient-Express Hotels' properties are located in areas where
there are numerous competitors. For example, in the last two years, competing
deluxe hotels opened near its properties in New Orleans, Sydney and Rio de
Janeiro. Competitive factors in the hospitality industry include convenience of
location, quality of the property, room rates and menu prices, range and quality
of food services and amenities offered, types of cuisine, and name recognition.
Demographic, geographic or other changes in one or more of our markets could
impact the convenience or desirability of our hotels and restaurants, and so
could adversely affect their operations. Also, new or existing competitors could
significantly lower rates or offer greater conveniences, services or amenities
or significantly expand, improve or introduce new facilities in the markets in
which our hotels and restaurants compete.
4
The hospitality industry is heavily regulated, including with respect to food
and beverage sales, employee relations, construction and environmental concerns,
and compliance with these laws could reduce revenues and profits of properties
owned or managed by Orient-Express Hotels.
Orient-Express Hotels and its various properties are subject worldwide
to numerous laws, including those relating to the preparation and sale of food
and beverages, liquor service, and health and safety of the premises. Its
properties are also subject to laws governing our relationship with our
employees in such areas as minimum wage and maximum working hours, overtime,
working conditions, hiring and firing employees and work permits. Also, the
success of expanding Orient-Express Hotels' existing properties depends upon its
obtaining necessary building permits or zoning variances from local authorities.
Orient-Express Hotels also is subject to foreign and U.S. laws and
regulations relating to the environment and the handling of hazardous substances
which may impose or create significant potential environmental liabilities, even
in situations where the environmental problem or violation occurred on a
property before Orient-Express Hotels acquired it.
Orient-Express Hotels' acquisition, expansion and development strategy may be
less successful than we expect, and, therefore, its growth may be limited.
Orient-Express Hotels intends to increase its revenues and net income
through acquisitions of new properties and expansion of its existing properties.
Successful pursuit of new growth opportunities will depend on the ability to
identify properties suitable for acquisition and expansion, to negotiate
purchases or construction on satisfactory terms, to obtain the necessary
financing and permits and to integrate new properties into existing operations.
Also, the acquisition of properties in new locations may present operating and
marketing challenges that are different from those currently encountered in
existing locations. We cannot assure you that Orient-Express Hotels will succeed
in its growth strategy.
Orient-Express Hotels may develop new properties in the future. New
project development is subject to such adverse factors as market or site
deterioration after acquisition, inclement weather, labor or material shortages,
work stoppages and the continued availability of construction and permanent
financing. For example, the opening of the Westcliff Hotel in Johannesburg
occurred about six months later than originally planned, as construction took
longer than expected. This delay had a significant adverse impact on the
revenues and profitability of African operations.
We cannot be sure that Orient-Express Hotels will obtain the necessary
additional capital to finance the growth of its business.
The acquisition and expansion of leisure properties, as well as the
ongoing renovations, refurbishments and improvements required to maintain or
upgrade existing properties, are capital intensive. Orient-Express Hotels'
current expansion plans call for the expenditure of up to an aggregate of about
$80,000,000 over the next few years to add new rooms and/or facilities to
existing properties. Orient-Express Hotels also plans to continue to acquire
additional properties. The availability of future borrowings and access to the
capital markets for equity financing to
5
fund these acquisitions and expansions depends on prevailing market conditions
and the acceptability of financing terms offered to Orient-Express Hotels. We
cannot assure you that future borrowings or equity financing will be available
to Orient-Express Hotels, or available on acceptable terms, in an amount
sufficient to fund its needs. Future debt financings could involve restrictive
covenants that would limit Orient-Express Hotels' flexibility in operating its
business.
Currency fluctuations may have a material adverse effect on Orient-Express
Hotels' financial statements and/or its operating margins.
Substantial portions of the revenues and expenses of Orient-Express
Hotels are denominated in non-U.S. currencies such as European euros, British
pounds sterling, South African rand, Australian dollars, Peruvian nuevos soles,
Botswana pula, Brazilian reals, Mexican pesos and French Pacific francs. In
addition, we buy assets and incur liabilities in these foreign currencies.
Our financial statements, which are presented in U.S. dollars, can be
impacted by foreign exchange fluctuations through both
o translation risk, which is the risk that our financial statements
for a particular period or as of a certain date depend on the
prevailing exchange rates of the various currencies against the
U.S. dollar, and
o transaction risk, which is the risk that the currency of our
costs and liabilities fluctuates in relation to the currency of
our revenue and assets, which fluctuations may adversely affect
our operating margins.
We cannot assure you that we will be able to manage effectively our
currency transactions and/or translation risks or that any volatility in
currency exchange rates will not have a material adverse effect on our financial
statements and/or our operating margins.
With respect to translation risk, even though the fluctuations of
currencies against the U.S. dollar can be substantial and therefore
significantly impact comparisons with prior periods, the translation impact is a
reporting consideration and does not affect the underlying results of
operations, as transaction risk does. As far as we can, we match foreign
currency revenues and costs and assets and liabilities to provide a natural
hedge against translation risks although this is not a perfect hedge.
With respect to transaction risk, although this risk may adversely
affect operating margins, we may mitigate our exposure by entering into forward
foreign exchange contracts from time to time.
6
Orient-Express Hotels' owned hotels and restaurants are subject to risks
generally incident to the ownership of commercial real estate and often beyond
its control.
These include
o changes in national, regional and local economic and political
conditions,
o changes in interest rates and in the availability, cost and terms
of financing,
o the impact of present or future governmental legislation and
regulations (including environmental laws),
o the ongoing need for capital improvements to maintain or upgrade
properties,
o changes in property taxes and operating expenses, and
o the potential for uninsured or underinsured losses.
Orient-Express Hotels' operations may be adversely affected by extreme weather
conditions and the impact of natural disasters.
Orient-Express Hotels operates properties in a variety of locales, each
of which is subject to local weather patterns and their effects on our
properties as well as on customer travel. Since Orient-Express Hotels' revenues
are dependent on the revenues of individual properties, extreme weather
conditions can from time to time have a major adverse impact upon individual
properties or particular regions. For example, in November 1999 a major
hurricane passed over St. Martin where the La Samanna hotel is located,
resulting in the closing of the hotel until February 2000 so that much of the
high season that year was missed.
Orient-Express Hotels' properties are also vulnerable to the effects of
destructive forces, such as fire, storms and flooding. Although the properties
are insured against property damage, damages resulting from acts of God or
otherwise may exceed the limits of the insurance coverage or be outside the
scope of that coverage. The La Samanna hotel, for example, suffered substantial
wind and flooding damage during the 1999 hurricane. Although it was fully
insured for that damage, Orient-Express Hotels may face losses with other
natural disasters affecting its properties in the future.
Orient-Express Hotels' substantial indebtedness could adversely affect its
financial health.
Orient-Express Hotels has a significant amount of debt and may incur
additional debt from time to time. As of September 30, 2003, its consolidated
long-term indebtedness was $567,947,000, including the current portion. Our
substantial indebtedness could
o require us to dedicate much of our cash flow from operations to
payments on our indebtedness, and so reduce the availability of
cash flow to fund our working capital, capital expenditures,
product and service development and other general corporate
purposes; for example, in 2002 Orient-Express Hotels generated
7
$35,300,000 in cash from operating activities after paying
interest of $18,400,000 and before loan principal repayments of
$35,900,000,
o limit our ability to obtain additional financing to fund future
working capital, capital expenditures, product and service
development and other general corporate purposes,
o increase our vulnerability to adverse economic and industry
conditions, including the seasonality of some of our businesses,
or
o limit our flexibility in planning for, or reacting to, changes in
our business and industry as well as the economy generally.
Also, since substantially all of our consolidated long-term debt at
September 30, 2003, accrued interest at rates that fluctuate with prevailing
interest rates, any increases in prevailing interest rates may increase our
interest payment obligations. From time to time, Orient-Express Hotels enters
into hedging transactions in order to manage its floating interest-rate
exposure.
Covenants in Orient-Express Hotels' financing agreements could limit its
discretion in operating its businesses, causing it to make less advantageous
business decisions; Orient-Express Hotels' indebtedness is secured by
substantially all of its properties.
Orient-Express Hotels' financing agreements with about 20 commercial
bank lenders contain covenants that include limits on additional debt secured by
mortgaged properties, limits on liens on property and limits on mergers and
asset sales, and financial covenants requiring maintenance of a minimum net
worth amount or a minimum interest expense coverage, or establishing a maximum
debt to equity ratio. Our indebtedness is also secured by substantially all of
its properties. Future financing agreements may contain similar, or even more
restrictive, provisions and covenants. If Orient-Express Hotels fails to comply
with the restrictions in its present or future financing agreements, a default
may occur. A default could allow the creditors to accelerate the related debt as
well as any other debt to which a cross-acceleration or cross-default provision
applies. A default could also allow the creditors to foreclose on the properties
securing such debt.
If the relationships between Orient-Express Hotels and its employees were to
deteriorate, it may be faced with labor shortages or stoppages, which would
adversely affect its ability to operate its facilities.
Orient-Express Hotels' relations with its employees in various
countries, including employees represented by labor unions, could deteriorate
due to disputes related to, among other things, wage or benefit levels, working
conditions, or our response to changes in government regulation of workers and
the workplace. Operations rely heavily on employees' providing high-quality
personal service, and any labor shortage or stoppage caused by poor relations
with employees, including labor unions, could adversely affect the ability to
provide those services, which could reduce occupancy and room revenue and even
tarnish Orient-Express Hotels' reputation.
8
Risks Relating to Our Relationship with Sea Containers Ltd.
Orient-Express Hotels' share price may be adversely affected by the limited
liquidity of its class A common shares in the market. Any sales of substantial
numbers of Orient-Express Hotels' shares by Sea Containers might adversely
affect the market price of such shares.
Sea Containers currently owns 11,943,901 of Orient-Express Hotels'
class A common shares and 2,459,399 of Orient-Express Hotels' class B common
shares, or approximately 43% of the class A and class B common shares currently
outstanding, excluding 18,044,478 class B common shares owned by Orient-Express
Holdings 1 Ltd., a wholly-owned subsidiary of Orient-Express Hotels. The
liquidity of the class A common shares in the market will continue to be limited
unless and until Sea Containers elects to make future sales of the class A
common shares covered by this prospectus. However, any future sales by Sea
Containers of substantial amounts of the class A common shares in the public
market, or the perception that such sales might occur, could adversely affect
the market price of the class A common shares.
A default under Sea Containers' debt instruments could trigger a default under
one of our loan agreements.
We have one remaining loan agreement which is guaranteed by Sea
Containers and is cross-defaulted to the debt of Sea Containers. Accordingly, a
default by Sea Containers under its loan agreements or public debt indentures
could result in a default under this loan agreement, which finances the
Observatory Hotel and Lilianfels Hotel in Australia and had an outstanding
balance of about $18,600,000 as of September 30, 2003. If a loan default or
public-debt default by Sea Containers occurred and caused a cross-default under
this loan agreement, and if Orient-Express Hotels were unable to pay off or
refinance this loan following that cross-default, that failure would result in
further cross-defaults under Orient-Express Hotels' other loan agreements.
Defaults under our loan agreements could lead to foreclosure and loss of control
of the properties securing these loan agreements. The lending bank under this
remaining loan agreement has agreed in principle to amend the agreement to
substitute Orient-Express Hotels for Sea Containers. However, we cannot assure
that this amendment will be executed. We do not intend to enter into loan
agreements in the future with provisions containing cross-defaults to Sea
Containers' debt or guarantees by Sea Containers. Orient-Express Hotels has
guaranteed no debt of Sea Containers.
Some of Orient-Express Hotels' directors and executive officers may have
conflicts of interest because of their ownership of Sea Containers' class A and
class B common shares or their positions at Sea Containers.
Some of Orient-Express Hotels' directors and executive officers --
James B. Sherwood, John D. Campbell, Daniel J. O'Sullivan and Edwin S.
Hetherington -- hold Sea Containers' class A and class B common shares and
options to purchase Sea Containers class A and class B common shares. These
persons also are executive officers or directors of Sea Containers. Sea
Containers' ownership of class A and class B common shares of Orient-Express
Hotels represents about 15% of the combined voting power of Orient-Express
Hotels' shares. Ownership of Sea Containers class A and class B common shares
by Orient-Express Hotels'
9
directors and officers, or their positions as executive officers or
directors of Sea Containers, could create, or appear to create, potential
conflicts of interest when directors and officers are faced with decisions that
could have different implications for Sea Containers and us. We have a code of
business practices in place administered by the Audit Committee of the Board of
Orient-Express Hotels and applicable to our principal executive, financial and
accounting officers to avoid conflicts of interest. However, we cannot assure
you that this will prevent future conflicts.
For many years while Orient-Express Hotels was a subsidiary of Sea
Containers, James B. Sherwood, the chairman of the board of directors and the
president of Sea Containers, has had an option to purchase the Hotel Cipriani in
Venice from Orient-Express Hotels at its fair market value if a change of
control of Sea Containers occurs. We are amending this option to apply to a
change of control of Orient-Express Hotels.
Other Risks
Orient-Express Hotels' directors and officers may control the outcome of most
matters submitted to a vote of its shareholders.
A wholly-owned subsidiary of Orient-Express Hotels -- Orient-Express
Holdings 1 Ltd., or Holdings -- currently holds 18,044,478 class B common shares
of Orient-Express Hotels representing about 76% of the voting power for most
matters submitted to a vote of Orient-Express Hotels' shareholders, and
Holdings, together with the directors and officers of Orient-Express Hotels,
holds common shares of Orient-Express Hotels representing about 77% of the
combined voting power for most matters submitted to a vote of its shareholders.
In general, holders of Orient-Express Hotels' class A common shares and holders
of its class B common shares vote together as a single class, with holders of
class A common shares having one-tenth of one vote per share and holders of
class B common shares having one vote per share. Therefore, as long as the
number of outstanding class B common shares exceeds one-tenth the number of
outstanding class A common shares, the holders of class B common shares could
control the outcome of most matters submitted to a vote of the shareholders.
Under Bermuda law, common shares of Orient-Express Hotels owned by Holdings are
outstanding and may be voted by Holdings. The manner in which Holdings votes its
Orient-Express Hotels common shares is determined by the six directors of
Holdings, three of whom -- John D. Campbell, Daniel J. O'Sullivan and James B.
Sherwood -- are also directors or officers of Orient-Express Hotels,
consistently with the exercise by those directors of their fiduciary duties to
Holdings. Those directors, should they choose to act together, will be able to
control substantially all matters affecting Orient-Express Hotels, and to block
a number of matters relating to any potential change of control of
Orient-Express Hotels. See "Description of the Common Shares--Voting Rights."
10
Provisions in Orient-Express Hotels' charter documents may discourage potential
acquisitions of Orient-Express Hotels, even those which the holders of a
majority of its class A common shares might favor.
Orient-Express Hotels' memorandum of association and bye-laws contain
provisions that could make it harder for a third party to acquire it without the
consent of its board of directors. These provisions include
o supermajority shareholder voting provisions for the removal of
directors from office with or without cause, and for "business
combination" transactions with beneficial owners of shares
carrying 15% or more of the votes which may be cast at any
general meeting of Orient-Express Hotels, and
o limitations on the voting rights of such 15% beneficial owners.
Also, our board of directors has the right under Bermuda law to issue
preferred shares without shareholder approval, which could be done to dilute the
stock ownership of a potential hostile acquirer. Although we believe these
provisions provide for an opportunity to receive a higher bid by requiring
potential acquirers to negotiate with our board of directors, these provisions
apply even if the offer may be considered beneficial by many shareholders.
These provisions are in addition to the ability of Holdings and
directors and officers to vote shares representing a significant majority of the
total voting power of our common shares. See "Description of the Common
Shares--Voting Rights." Also, the rights to purchase series A junior preferred
shares, one of which is attached to each class A and class B common share, may
have antitakeover effects. See "Description of the Common Shares--Preferred
Share Purchase Rights."
We cannot assure you that a judgment of a United States court for liabilities
under U.S. securities laws would be enforceable in Bermuda, or that an original
action can be brought in Bermuda against Orient-Express Hotels for liabilities
under U.S. securities laws.
Orient-Express Hotels is a Bermuda company, a majority of its directors
and officers are residents of Bermuda, the United Kingdom and elsewhere outside
the United States, and most of its assets and the assets of its directors and
officers are located outside the United States. As a result, it may be difficult
for you to
o effect service of process within the United States upon
Orient-Express Hotels or its directors and officers, or
o enforce judgments obtained in United States courts against
Orient-Express Hotels or its directors and officers based upon
the civil liability provisions of the United States federal
securities laws.
11
Orient-Express Hotels has been advised by its Bermuda counsel, Appleby
Spurling & Kempe, that there is doubt as to
o whether a judgment of a United States court based solely upon the
civil liability provisions of the United States federal
securities laws would be enforceable in Bermuda against
Orient-Express Hotels or its directors and officers, and
o whether an original action could be brought in Bermuda against
Orient-Express Hotels or its directors and officers to enforce
liabilities based solely upon the United States federal
securities laws.
FORWARD-LOOKING STATEMENTS
This prospectus, and the reports and other information that
Orient-Express Hotels has filed with the SEC which are incorporated by reference
in this prospectus, contain forward-looking statements, including statements
regarding matters such as
o competitive factors in our businesses,
o future capital expenditures,
o future legislation in any country where Orient-Express Hotels has
significant assets or operations,
o strikes or other labor disruptions,
o currency fluctuations, and
o trends in our future operating performance.
We have based these forward-looking statements largely on our
expectations as well as assumptions we have made and information currently
available to our management. When used in this prospectus or in incorporated
reports, the words "anticipate," "believe," "estimate," "expect" and similar
expressions, as they relate to Orient-Express Hotels or its management, are
intended to identify forward-looking statements. Forward-looking statements are
subject to a number of risks and uncertainties, some of which are beyond our
control. Actual results could differ materially from those anticipated, as a
result of the factors described under "Risk Factors" in this prospectus and
other factors. Furthermore, in light of these risks and uncertainties, the
forward-looking events and circumstances discussed in this prospectus and
incorporated reports might not transpire.
We undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.
12
DESCRIPTION OF THE COMMON SHARES
The authorized capital of Orient-Express Hotels consists of 120,000,000
class A common shares, 120,000,000 class B common shares and 30,000,000
preferred shares, all of $.01 par value each. There are currently 31,790,601
class A common shares and 2,459,399 class B common shares outstanding. The
number of class B common shares outstanding does not include the 18,044,478
shares which are owned by Holdings, a wholly-owned subsidiary of Orient-Express
Hotels, and accounted for as a reduction to outstanding shares including for
purposes of computing earnings per share while they are owned by Holdings.
Dividend Rights
Holders of class A and class B common shares receive such dividends as
the Orient-Express Hotels board of directors declares out of amounts available
under Bermuda law for that purpose. The board of directors may not declare a
cash dividend on the class A or class B common shares without at the same time
declaring an equal cash dividend on the other class of common shares.
For distributions other than cash dividends, the class A and class B
common shares rank equally and have the same rights, except that
o Orient-Express Hotels can distribute class A common shares, or
rights, options or warrants to subscribe for class A common
shares, only to the holders of class A common shares,
o Orient-Express Hotels can distribute class B common shares, or
rights, options or warrants to subscribe for class B common
shares, only to the holders of class B common shares, and
o the ratio of the number of class A common shares outstanding to
the number of class B common shares outstanding, each on a fully
diluted basis, must be the same immediately after such a
distribution as immediately before it, except as may be provided
in the shareholder rights agreement described below.
No Bermuda law, decree or regulation restricts the export or import of
capital, affects payment of dividends or other distributions by Orient-Express
Hotels to non-resident shareholders, or subjects United States holders of class
A or class B common shares to Bermuda taxes. Payment of dividends depends upon
Orient-Express Hotels' results of operations, financial position, capital
requirements and other relevant factors.
Voting Rights
Except as otherwise provided by Bermuda law, the holders of class A and
class B common shares have exclusive voting rights at any general meeting of
shareholders of Orient-Express Hotels, subject to the voting rights of the
holders of any preferred shares which Orient-Express Hotels may issue in the
future.
13
In general, holders of class A common shares and holders of class B
common shares vote together as a single class with holders of class A common
shares having one-tenth of one vote per share and holders of class B common
shares having one vote per share. However,
o Any action varying the rights of either class would require the
separate approval of that class as well as the approval of both
classes voting together.
o Any "Business Combination," as defined in the bye-laws, involving
Orient-Express Hotels and an "interested person" must be approved
by the holders of not less than 90% of the outstanding class A
and class B common shares voting together as a single class, each
with one vote, unless the Business Combination meets certain
procedural and fair price requirements. An interested person is
defined generally as a person, other than Orient-Express Hotels,
Sea Containers and each of their respective subsidiaries, which
is the beneficial owner of shares or rights over shares carrying
15% or more of the votes which may be cast at any general meeting
of Orient-Express Hotels.
o The shareholders of Orient-Express Hotels may remove directors
from office, with or without cause, at a special general meeting
only by a resolution adopted by the holders of not less than 90%
of the outstanding class A and class B common shares voting
together as a single class, each with one vote. A director may
also be removed for cause by resolution of the directors, or can
be defeated for re-election at an annual general meeting.
o If at any time a person becomes an interested person as defined
above, that person, with certain exceptions, will not be able to
cast more than 15% of the votes which may be cast at any general
meeting of Orient-Express Hotels for a period of five years from
the date that such person first became an interested person.
There is no provision for cumulative voting for the election of our
directors, under which, for example, a shareholder with ten votes participating
in an election for three directors could cast 30 votes for one nominee rather
than 10 votes for each of three nominees. In the absence of cumulative voting,
all of the directors can be elected by those shareholders which together can
cast a majority of the votes represented by all outstanding class A common
shares each with one-tenth of a vote and all outstanding class B common shares
each with one vote. As long as the number of outstanding class B common shares
exceeds one-tenth the number of outstanding class A common shares, the holders
of class B common shares could control the outcome of most matters submitted to
a vote of our shareholders.
In general, under The Companies Act 1981 of Bermuda and the
Orient-Express Hotels' bye-laws, approval of any matter proposed at any general
meeting requires the affirmative vote of a simple majority of the total votes
cast on that matter by the holders of class A common shares and class B common
shares present in person or represented by proxy. Matters requiring such simple
majority approval include proposals for the sale of all or substantially all of
Orient-Express Hotels' assets, and amendments to its memorandum of association
or bye-laws.
14
A few matters would require more than majority approval under The Companies Act
1981, such as loans to directors, which would require the affirmative vote of at
least 90% of the total votes of all outstanding class A and class B common
shares, or a change of Orient-Express Hotels' independent auditors, which would
require the affirmative vote of at least two-thirds of the total votes cast of
class A and class B common shares, or a proposal for the amalgamation or merger
of Orient-Express Hotels with another corporation, which would require the
affirmative vote of at least 75% of the total votes cast of class A and class B
common shares.
The normal quorum for general meetings is the presence, in person or by
proxy, of the holders of class A and class B common shares carrying a majority
of the votes which may be cast at the meeting. However, at any special general
meeting called for the purpose of electing directors or increasing or reducing
the number of directors, the holders of not less than 90% in number of the
outstanding class A and class B common shares must be present in person or by
proxy to constitute a quorum.
There are no limitations imposed by Bermuda law or by Orient-Express
Hotels' memorandum of association and bye-laws on the rights of persons who are
not citizens or residents of Bermuda to hold or vote class A or class B common
shares.
Preferred Share Purchase Rights
Orient-Express Hotels has in place a shareholder rights agreement
providing for rights to purchase series A junior participating preferred shares
of Orient-Express Hotels. The rights are not currently exercisable and they are
attached to and trade together with the class A and class B common shares on a
one-to-one basis. A right will be attached to each class A common share sold in
this offering.
The shareholder rights agreement will take effect not earlier than the
tenth day after the first to occur of
o the public announcement that a person or group has become an
"acquiring person," that is, a person or group that has acquired
beneficial ownership of shares carrying 20% or more of the total
votes which may be cast at any general meeting of Orient-Express
Hotels, but excluding any subsidiary of Orient-Express Hotels,
Sea Containers or any subsidiary of Sea Containers, and
o the commencement or announcement of an intended tender offer or
exchange offer for shares carrying 30% or more of the total votes
which may be cast at any general meeting of Orient-Express
Hotels.
At that time, the rights then attached to all outstanding class A and
class B common shares will become separate securities, and each right will
entitle its holder to purchase one one-hundredth of a Series A junior
participating preferred share of Orient-Express Hotels at an exercise price of
$142. The exercise price will be adjusted in the future to reflect stock splits
and other changes to the class A and class B common shares.
15
However,
o From and after the date on which any person becomes an acquiring
person, each holder of a right other than the acquiring person
may exercise the right and receive, at the then current exercise
price of the right, that number of class A common shares, in the
case of a right which previously was attached to a class A common
share, or that number of class B common shares, in the case of a
right which previously was attached to a class B common share, or
other securities, cash or property, then having a market value of
twice the exercise price;
o If, after the shareholder rights agreement takes effect,
Orient-Express Hotels is acquired by consolidation, merger or
amalgamation, or Orient-Express Hotels sells or otherwise
transfers 50% or more of its consolidated assets or earning
power, each holder of a right, other than an acquiring person,
may exercise the right and receive, at the then current exercise
price of the right, an amount of the common equity of the
acquiring company or its public company parent which at the time
of such transaction would have a market value of twice the
exercise price of the right; and
o At any time after any person becomes an acquiring person and
before a person or group (other than Orient-Express Hotels, Sea
Containers or certain of their affiliates) acquires beneficial
ownership of 50% or more of the total voting rights which may be
cast at any general meeting of Orient-Express Hotels, the board
of directors of Orient-Express Hotels may exchange all or some of
the rights other than rights beneficially owned by an acquiring
person, which rights will thereafter be void, at an exchange
ratio of
(A) one class A common share per right in the case of
rights which, prior to the date they became separate
securities, were evidenced by certificates for class A
common shares, and
(B) one class B common share per right in the case of
rights which, prior to the date they became separate
securities, were evidenced by certificates for class B
common shares,
subject to adjustment in certain events.
Until a right is exercised, the holder thereof, as such, will have no
rights as a shareholder including, without limitation, the right to vote or to
receive dividends. While the issuance of the rights will not be taxable to
shareholders or to Orient-Express Hotels for United States federal income tax
purposes, shareholders may, depending on the circumstances, recognize taxable
income for United States federal income tax purposes in the event the rights
become exercisable, or upon their exercise, for class A or class B common shares
(or other consideration).
The rights will expire on June 1, 2010. However, the board of directors
of Orient-Express Hotels may redeem all but only all of the rights sooner at a
price of $0.05 per right at any time
16
before the close of business on the tenth day after the date on which a person
becomes an acquiring person.
The purpose of the rights is to diminish the attractiveness of
Orient-Express Hotels to persons who might otherwise have an interest in
acquiring control of Orient-Express Hotels on unfair or coercive terms and to
impede such persons from attempting to gain control of Orient-Express Hotels on
such terms through a tender or exchange offer, by a proxy contest or by other
means.
Liquidation Rights
In a liquidation, dissolution or winding-up of Orient-Express Hotels,
holders of class A and class B common shares as a single class would participate
equally per share in the assets remaining available for distribution to
shareholders, after payment of the liabilities of Orient-Express Hotels and the
liquidation preferences on its preferred shares.
Conversion Rights
The class A common shares are not convertible into any other security.
Each class B common share is convertible at any time without any additional
payment into one class A common share.
Miscellaneous
Neither class A nor class B common shares have the benefit of sinking
fund provisions or are redeemable or carry any preemptive or other rights to
subscribe for additional shares, except that holders of class B common shares
may convert their shares into class A common shares as described above. The
holders of class A and class B common shares are not liable for any further
calls or assessments.
SELLING SHAREHOLDER
As of the date of this prospectus, Sea Containers owns 11,943,901 class
A common shares and 2,459,399 class B common shares. This represents
approximately 38% and 12%, respectively, of the shares of each such class
currently outstanding, including those shares held by Holdings, a subsidiary of
Orient-Express Hotels, or 38% and 100%, respectively, of the shares of each such
class outstanding, excluding the shares held by Holdings. If Sea Containers
sells all of the 14,403,300 class A common shares covered by this prospectus
(including the 2,459,399 class A common shares issuable upon conversion of the
2,439,399 class B common shares owned by Sea Containers), Sea Containers will
cease to own any class A common shares or class B common shares.
For information concerning the relationship between Orient-Express
Hotels and Sea Containers, we refer you to the portions of this prospectus under
the headings "Risk Factors--Risks Relating to Our Relationship with Sea
Containers Ltd."
17
PLAN OF DISTRIBUTION
Orient-Express Hotels has registered under the Securities Act of 1933,
as amended, the offering of 14,403,300 class A common shares covered by this
prospectus (the "Shares") on behalf of Sea Containers, as selling shareholder,
and also on behalf of any donees, pledgees, transferees and other
successors-in-interest that may receive Shares from Sea Containers after the
date of this prospectus as a gift, pledge, partnership distribution or other
non-sale related transfer. Sea Containers is bearing all expenses, fees, and
taxes in connection with the registration of the offering of the Shares under
the Securities Act of 1933 and will pay any brokerage commissions and similar
selling expenses attributable to the sale of Shares. Orient-Express Hotels will
receive no part of the proceeds from the sale of the Shares by Sea Containers.
Sea Containers has agreed to indemnify Orient-Express Hotels against certain
losses, claims, damages and liabilities incident to the sale of the Shares,
including liabilities under the Securities Act.
Sea Containers has informed Orient-Express Hotels that it may effect
sales of Shares from time to time in
o ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers,
o block trades, in which the broker-dealer will attempt to sell the
Shares as agent but may position and resell a portion of the
block as principal to facilitate the transaction,
o purchases by a broker-dealer as principal and resale by the
broker-dealer for its account,
o fixed price offerings, exchange distributions or special
offerings in accordance with the rules of the applicable
exchange,
o privately negotiated transactions,
o short sales,
o sales by broker-dealers of a specified number of Shares at a
stipulated price per share,
o a combination of any such methods of sale, and
o any other method permitted pursuant to applicable law,
at market prices prevailing at the time of sale, or at negotiated prices. These
sales may or may not involve brokers or dealers.
Sea Containers has not yet entered into any agreements, understandings
or arrangements with any underwriters or broker-dealers regarding the sale of
the Shares, nor is there currently an underwriter or coordinating broker acting
in connection with the proposed sale of the Shares by
18
Sea Containers. However, before Sea Containers sells any of the Shares, it will
enter into a sales agreement with one or more broker-dealers. This agreement
will set forth the terms under which Sea Containers may sell Shares to or
through broker-dealers acting as agents or principals. Any of these
broker-dealers may receive compensation in the form of discounts, concessions,
or commissions from Sea Containers and/or the purchasers of the Shares for whom
such broker-dealers may act as agents or to whom they may sell as principal, or
both. Compensation as to a particular broker-dealer may exceed customary
commissions.
Sea Containers, and any broker-dealers that act as principals in
connection with the sale of Shares, will be "underwriters" within the meaning of
Section 2(11) of the Securities Act, any broker-dealers that act as agents in
that connection may be deemed to be "underwriters," and any compensation these
broker-dealers receive, and any profit they realize from the resale of the
Shares while acting as principals, might be considered as underwriting discounts
or commissions. Sea Containers may agree to indemnify any agent, dealer or
broker that participates in transactions involving sales of the Shares against
certain liabilities, including liabilities arising under the Securities Act.
Because Sea Containers will be an "underwriter" within the meaning of
Section 2(11) of the Securities Act, it will be subject to the prospectus
delivery requirements of the Securities Act for offers and sales of the Shares,
including delivery through the facilities of the New York Stock Exchange as
provided in Rule 153 under the Securities Act. Orient-Express Hotels has
informed Sea Containers that the anti-manipulative provisions of Regulation M
promulgated under the Exchange Act may apply to sales in the market by Sea
Containers.
Sea Containers may also resell all or some of the Shares in open market
transactions under Rule 144 under the Securities Act, if available, rather than
under this prospectus.
If Sea Containers notifies Orient-Express Hotels that Sea Containers
has entered into any material arrangement with a broker-dealer for the sale of
Shares through a block trade, special offering, exchange distribution or
secondary distribution or a purchase by a broker or dealer, Orient-Express
Hotels will file a supplement to this prospectus, if required, pursuant to Rule
424(b) under the Securities Act, disclosing
o the name of the participating broker-dealer(s),
o the number of Shares involved,
o the price at which such Shares were sold,
o the commission paid or discounts or concessions allowed to the
broker-dealer(s), where applicable,
o whether the broker-dealer(s) conducted any investigation to
verify the information in or incorporated by reference in this
prospectus, and
o other material facts of the transaction.
19
Also, if Sea Containers notifies Orient-Express Hotels that a donee, pledgee,
transferee or other successor-in-interest of the Shares intends to sell more
than 500 Shares, Orient-Express Hotels will file an appropriate supplement to
this prospectus.
The maximum commission or discount to be received by any NASD member or
independent broker-dealer will no be greater than 8% for the sale of any
securities being registered pursuant to Rule 415.
AUTHORIZED REPRESENTATIVE
Orient-Express Hotels' authorized representative in the United States
for this offering as required pursuant to Section 6(a) of the Securities Act of
1933, is J. Robert Lovejoy, One Rockefeller Plaza, New York, New York 10020.
Orient-Express Hotels has agreed to indemnify the authorized representative
against liabilities under the Securities Act of 1933.
LEGAL MATTERS
Carter Ledyard & Milburn LLP, New York, New York, is passing upon
matters of United States law for Orient-Express Hotels and Sea Containers with
respect to this offering, and Appleby Spurling & Kempe, Hamilton, Bermuda, is
passing upon matters of Bermuda law for Orient-Express Hotels and Sea Containers
with respect to this offering. Robert M. Riggs, who is senior counsel at Carter
Ledyard & Milburn LLP, having recently retired as a member of that firm, is a
director of Sea Containers, and John D. Campbell, who recently retired as senior
counsel at Appleby Spurling & Kempe, is a director of Orient-Express Hotels and
Sea Containers.
EXPERTS
The consolidated financial statements and related consolidated
financial statement schedule incorporated in this prospectus by reference from
Orient-Express Hotels' Annual Report on Form 10-K for the year ended December
31, 2002 have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report which expresses an unqualified opinion and includes an
explanatory paragraph referring to the adoption by Orient-Express Hotels of
Statement of Financial Accounting Standards ("SFAS") No. 142, Goodwill and Other
Intangible Assets, effective January 1, 2002, and SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities, as amended by SFAS No. 137 and
138, effective January 1, 2001, which is incorporated herein by reference, and
have been so incorporated by reference in reliance upon the report of such firm
given upon their authority as experts in accounting and auditing.
20
WHERE YOU CAN FIND MORE INFORMATION
This prospectus is a part of a registration statement on Form S-3 which
Orient-Express Hotels filed with the SEC under the Securities Act of 1933,
Registration No. 333-102576. We refer you to this registration statement for
further information with respect to Orient-Express Hotels and the class A common
shares offered by this prospectus.
Orient-Express Hotels files annual, quarterly and special reports and
other information with the Securities and Exchange Commission (Commission File
Number 1-16017). These filings contain some information which does not appear in
this prospectus. For further information about Orient-Express Hotels, you may
obtain these filings over the internet at the SEC's Web site at
http://www.sec.gov. You may also read and copy these filings at the SEC's public
reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain
information on the operation of the public reference room by calling the SEC at
1-800-SEC-0330, and may obtain copies of Orient-Express Hotels' filings from the
public reference room by calling (202) 942-8090.
The SEC allows Orient-Express Hotels to "incorporate by reference"
information into this prospectus, which means that we can disclose important
information to you by referring you to other documents which Orient-Express
Hotels has filed or will file with the SEC. We are incorporating by reference in
this prospectus
o Orient-Express Hotels' Annual Report on Form 10-K for the fiscal
year ended December 31, 2002,
o Orient-Express Hotels' Quarterly Reports on Form 10-Q for the
quarterly periods ended March 31, 2003, June 30, 2003 and
September 30, 2003,
o Orient-Express Hotels' Current Report on Form 8-K bearing cover
date of April 8, 2003,
o The description of Orient-Express Hotels' class A common shares
which appears in its Registration Statement on Form 8-A dated
July 28, 2000, for the registration of the class A common shares
under Section 12(b) of the Securities Exchange Act of 1934, and
o The description of the Rights which appears in Orient-Express
Hotels' Registration Statement on Form 8-A dated July 28, 2000
for the registration of the Rights under Section 12(b) of the
Securities Exchange Act of 1934.
All documents which Orient-Express Hotels files with the SEC pursuant
to Section 13(a), 13(c) or 15(d) of the Securities Exchange Act after the date
of this prospectus and before the termination of this offering of class A common
shares shall be deemed to be incorporated by reference in this prospectus and to
be a part of it from the filing dates of such documents. Certain statements in
and portions of this prospectus update and replace information in the above
listed documents incorporated by reference. Likewise, statements in or portions
of a future document
21
incorporated by reference in this prospectus may update and replace statements
in and portions of this prospectus or the above listed documents.
We shall provide you without charge, upon your written or oral request,
a copy of any of the documents incorporated by reference in this prospectus,
other than exhibits to such documents which are not specifically incorporated by
reference into such documents. Please direct your written or telephone requests
to the Secretary, Orient-Express Hotels Inc., 1155 Avenue of the Americas, New
York, New York 10036 (telephone 212-302-5055).
Orient-Express Hotels is a Bermuda company and is a "foreign private
issuer" as defined in Rule 3b-4 under the Securities Exchange Act of 1934. As a
result, (1) Orient-Express Hotels' proxy solicitations are not subject to the
disclosure and procedural requirements of Regulation 14A under the Securities
Exchange Act, and (2) transactions in Orient-Express Hotels' equity securities
by its officers and directors are exempt from Section 16 of the Exchange Act.
22