1001-00005 · Ardent Capital Partners · Regulatory

sec-comment-response-letter-draft.docx DOCUMENT M&A / Corporate

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PRIVILEGED & CONFIDENTIAL — ATTORNEY WORK PRODUCT — FOR REVIEW PURPOSES ONLY — NOT FOR FILING UNTIL APPROVED BY CLIENT

CORAL REEF HOSPITALITY GROUP, INC. 2400 Bayshore Boulevard, Suite 300 Tampa, FL 33629

June 14, 2022

VIA EDGAR CORRESPONDENCE FILING

Division of Corporation Finance Office of Mergers & Acquisitions U.S. Securities and Exchange Commission 100 F Street, N.E. Washington, D.C. 20549

Re: Coral Reef Hospitality Group, Inc. Preliminary Proxy Statement on Schedule 14A Filed May 10, 2022 SEC File No. 001-38742 CUSIP 21874R109 Nasdaq Capital Market Ticker: CRFH

Ladies and Gentlemen:

On behalf of Coral Reef Hospitality Group, Inc. (the "Company" or "CRFH"), we are writing in response to the comment letter of the staff (the "Staff") of the Division of Corporation Finance of the U.S. Securities and Exchange Commission (the "Commission"), dated June 3, 2022 (the "Comment Letter"), relating to the Company's preliminary proxy statement on Schedule 14A (the "Preliminary Proxy Statement"), filed with the Commission on May 10, 2022. The Preliminary Proxy Statement was filed in connection with the proposed merger (the "Merger") of CRFH Acquisition Sub, Inc. ("Merger Sub"), a wholly owned subsidiary of Ardent Capital Partners III LP ("Ardent Capital"), with and into the Company, pursuant to that certain Agreement and Plan of Merger, dated as of April 25, 2022, by and among the Company, Merger Sub, and Ardent Capital (the "Merger Agreement").

This letter has been prepared by Calderwood & Harkness LLP (1301 Avenue of the Americas, 40th Floor, New York, NY 10019), in coordination with Whitfield, Crane & Sato LLP (One Southeast Financial Center, Suite 4200, Miami, FL 33131), each acting as outside counsel on behalf of the Company.

For the convenience of the Staff, we have reproduced below, in bold text, the full text of each of the Staff's comments from the Comment Letter, followed in each instance by the Company's response. Unless otherwise indicated, all page references in this letter are to the pages of the Preliminary Proxy Statement as filed on May 10, 2022. The Company intends to file a revised preliminary proxy statement on Schedule 14A (the "Revised Proxy Statement") incorporating the revisions described in this letter on or about June 17, 2022. All capitalized terms used but not otherwise defined in this letter have the meanings ascribed to such terms in the Preliminary Proxy Statement.

Comment 1: Merger Consideration and Premium Disclosure

The Staff notes that the Preliminary Proxy Statement discloses that the merger consideration is $4.75 per share in cash. Please revise the disclosure to provide enhanced detail regarding the basis for the $4.75 per share all-cash merger consideration. In particular, please clarify the premium calculation, including identification of the unaffected trading price and the specific date used to calculate the premium. Additionally, please disclose the aggregate equity value implied by the per-share merger consideration and the number of shares of common stock outstanding used in such calculation.

Response:

The Company acknowledges the Staff's comment and will revise the disclosure in the Revised Proxy Statement to provide enhanced detail regarding the merger consideration and the premium implied thereby.

Specifically, the Company will revise the disclosure to state that the merger consideration of $4.75 per share in cash (the "Merger Consideration") represents a premium of approximately 47.5% over the closing price of the Company's common stock of $3.22 per share on the Nasdaq Capital Market on February 10, 2022, the last full trading day prior to Ardent Capital Partners III LP's submission of its non-binding indication of interest (the "IOI") on February 11, 2022 (such closing price, the "Unaffected Price"). The Company selected February 10, 2022 as the reference date for purposes of the premium calculation because it represents the last trading day on which the Company's stock price was not potentially affected by market awareness of, or speculation regarding, the possibility of a strategic transaction involving the Company.

The Company will further clarify that, as of the date of the Merger Agreement, there were 6,315,789 shares of CRFH common stock, par value $0.0001 per share, issued and outstanding. No shares of the Company's preferred stock were issued or outstanding as of such date. Accordingly, the Merger Consideration of $4.75 per share implies an aggregate equity value of approximately $30,000,000 (calculated as 6,315,789 shares multiplied by $4.75 per share).

In addition, the Company will provide the following contextual information to enable stockholders to evaluate the Merger Consideration in relation to the Company's pre-announcement market valuation and enterprise value:

• The Company's unaffected market capitalization, calculated using the Unaffected Price of $3.22 per share and 6,315,789 shares outstanding, was approximately $20,336,840.

• The implied enterprise value of the Company, based on the Merger Consideration, is approximately $38,200,000, calculated as the sum of the aggregate equity value of $30,000,000 plus net debt of approximately $8,200,000. Net debt is calculated as total consolidated debt of approximately $11,400,000 less cash and cash equivalents of approximately $3,200,000, each as reported in the Company's audited consolidated balance sheet as of December 31, 2021.

• The implied enterprise value of approximately $38,200,000 represents an EV/EBITDA multiple of approximately 7.5x based on the Company's last twelve months ("LTM") Adjusted EBITDA of approximately $5,100,000 for the fiscal year ended December 31, 2021.

• The implied enterprise value represents an EV/Revenue multiple of approximately 0.99x based on LTM revenue of approximately $38,700,000 for the fiscal year ended December 31, 2021.

This enhanced disclosure will appear in the sections of the Revised Proxy Statement captioned "Summary Term Sheet — The Merger Consideration" (beginning on page 3), "Special Factors — Merger Consideration and Premium" (beginning on page 22), and "Special Factors — Opinion of Lantern Hill Advisory LLC" (beginning on page 35), as well as in the "Questions and Answers" section beginning on page 7 of the Revised Proxy Statement.

Comment 2: Background of the Merger — Go-Shop Process

The Staff notes that the Preliminary Proxy Statement describes a 30-day "go-shop" period under the Merger Agreement. Please revise the disclosure to provide additional detail regarding the go-shop period, including the number of parties contacted during the go-shop period, the nature and scope of the outreach conducted, and the results of that outreach. In addition, please clarify the specific start and end dates of the go-shop period and whether any "Superior Proposals" (as defined in the Merger Agreement) were received during the go-shop period. Finally, please describe the transition from the go-shop period to the no-shop (non-solicitation) covenant under the Merger Agreement and the terms of such non-solicitation covenant.

Response:

The Company acknowledges the Staff's comment and will revise the disclosure in the Revised Proxy Statement to provide substantially enhanced detail regarding the go-shop process and the transition to the non-solicitation covenant.

The Company will revise the disclosure to specify that the go-shop period commenced upon execution of the Merger Agreement on April 25, 2022 and expired at 11:59 p.m. Eastern Time on May 25, 2022, comprising a period of 30 calendar days (the "Go-Shop Period"). During the Go-Shop Period, the Company and its representatives, including the Special Committee and its independent financial advisor, Lantern Hill Advisory LLC ("Lantern Hill"), were permitted to actively solicit, initiate, facilitate, encourage, and negotiate alternative acquisition proposals from third parties.

The Company will revise the disclosure to describe the go-shop process in the following enhanced detail:

• Under the direction and supervision of the Special Committee, Lantern Hill, led by Managing Director Evan Nakashima, conducted an active outreach process during the Go-Shop Period. In total, Lantern Hill contacted 14 potentially interested parties, consisting of seven strategic parties (companies operating in the hospitality, resort management, and lodging sectors) and seven financial sponsors (private equity firms and family offices with demonstrated interest in hospitality-related assets).

• Of the 14 parties contacted, five parties (three strategic and two financial) executed confidentiality agreements and received access to a virtual data room containing due diligence materials prepared by the Company and its advisors. The remaining nine parties either declined to participate or did not respond to Lantern Hill's outreach within a commercially reasonable time frame.

• Of the five parties that accessed the virtual data room, two parties — one strategic buyer and one financial sponsor — submitted preliminary, non-binding indications of interest during the Go-Shop Period. However, neither of these indications of interest proposed consideration that the Special Committee, after consultation with Lantern Hill and legal counsel, determined to be reasonably likely to lead to a "Superior Proposal" as defined in Article VI, Section 6.5(e) of the Merger Agreement. Specifically, the strategic buyer's indication reflected an implied per-share value range of $3.80 to $4.20, which was below the Merger Consideration of $4.75 per share, and was subject to significant due diligence, financing, and regulatory conditions. The financial sponsor's indication reflected an implied per-share value in the range of $4.00 to $4.50, which was also below the Merger Consideration and was subject to completion of confirmatory due diligence and financing.

• No party submitted a proposal that constituted a "Superior Proposal" as defined in the Merger Agreement during the Go-Shop Period. Accordingly, the Company did not designate any party as an "Excluded Party" entitled to continue discussions beyond the expiration of the Go-Shop Period.

The Company will further revise the disclosure to clarify that upon expiration of the Go-Shop Period at 11:59 p.m. Eastern Time on May 25, 2022, the non-solicitation covenant set forth in Article VI, Section 6.5(b) of the Merger Agreement became effective. Pursuant to the non-solicitation covenant, the Company, its directors, officers, employees, and representatives are restricted from, directly or indirectly, soliciting, initiating, knowingly encouraging, or knowingly facilitating any inquiry, proposal, or offer that constitutes, or would reasonably be expected to lead to, an alternative "Acquisition Proposal" (as defined in the Merger Agreement). The Company is also prohibited from furnishing any non-public information to any third party in connection with an Acquisition Proposal, or entering into, participating in, or continuing any discussions or negotiations with any third party with respect to an Acquisition Proposal.

The non-solicitation covenant is subject to customary "fiduciary-out" provisions, as set forth in Article VI, Section 6.5(c) of the Merger Agreement, which permit the Board of Directors (acting upon the recommendation of the Special Committee) to engage with an unsolicited Acquisition Proposal if the Board determines in good faith (after consultation with its outside financial advisor and outside legal counsel) that such proposal constitutes or would reasonably be expected to lead to a Superior Proposal, and that the failure to take such action would be inconsistent with the directors' fiduciary duties under applicable law. The Board is required to provide Ardent Capital with written notice of its receipt of a Superior Proposal and to afford Ardent Capital a five-business-day "match right" period during which Ardent Capital may propose amendments to the terms of the Merger Agreement.

The Company will also disclose that the Merger Agreement provides for a Company Termination Fee of $900,000 (representing approximately 3.0% of the aggregate equity value of $30,000,000), payable by the Company to Ardent Capital if the Merger Agreement is terminated in certain circumstances, including a termination by the Company in order to accept a Superior Proposal. During the Go-Shop Period, the applicable termination fee was reduced to $600,000 (representing approximately 2.0% of the aggregate equity value), in order to encourage potential alternative bidders to submit proposals during the Go-Shop Period without an undue deterrent. Upon expiration of the Go-Shop Period without the designation of any Excluded Party, the full Company Termination Fee of $900,000 became applicable.

This enhanced disclosure will appear in the sections of the Revised Proxy Statement captioned "Background of the Merger — Go-Shop Process" (beginning on page 28), "The Merger Agreement — Non-Solicitation; Superior Proposals" (beginning on page 56), and "The Merger Agreement — Termination Fees" (beginning on page 62).

Comment 3: Fairness Opinion of Lantern Hill Advisory LLC

The Staff notes that the Preliminary Proxy Statement includes a summary of the fairness opinion delivered by Lantern Hill Advisory LLC to the Special Committee of the Board of Directors. Please revise the disclosure to provide enhanced detail regarding the financial analyses performed by Lantern Hill Advisory LLC in connection with its fairness opinion, including the specific valuation methodologies used, the key assumptions underlying each methodology, and the resulting valuation ranges. In addition, please clarify whether the fairness opinion addressed the fairness of the $4.75 per share merger consideration from a financial point of view to the holders of CRFH common stock (other than Ardent Capital Partners III LP and its affiliates). Finally, please disclose any material relationships between Lantern Hill Advisory LLC and the Company or its affiliates during the two years preceding the date of the opinion, and the fee arrangements between Lantern Hill and the Company.

Response:

The Company acknowledges the Staff's comment and will revise the disclosure in the Revised Proxy Statement to provide substantially enhanced detail regarding the financial analyses performed by Lantern Hill Advisory LLC in connection with its fairness opinion (the "Fairness Opinion"), which was delivered to the Special Committee on April 22, 2022.

The Company will revise the disclosure to describe each of the principal valuation methodologies employed by Lantern Hill in its financial analyses, as summarized below:

Discounted Cash Flow Analysis

The Company will disclose that Lantern Hill performed a discounted cash flow ("DCF") analysis of the Company based on management projections of the Company's unlevered free cash flows for fiscal years 2022 through 2026, as prepared by the Company's management and approved by the Special Committee for use by Lantern Hill (the "Management Projections"). Lantern Hill calculated the present value of the Company's projected unlevered free cash flows using discount rates ranging from 12.0% to 15.0%, reflecting Lantern Hill's estimate of the Company's weighted average cost of capital based on, among other things, the capital asset pricing model, the Company's capital structure, comparable company betas, and a size premium reflecting the Company's small capitalization. Terminal values were calculated using a perpetuity growth methodology, applying a terminal growth rate of 2.0% to 3.0%, as well as an alternative exit multiple methodology, applying terminal EV/EBITDA multiples of 6.5x to 8.5x to the Company's projected fiscal year 2026 EBITDA. The DCF analysis yielded an implied per-share equity value range of approximately $3.95 to $5.40. The Merger Consideration of $4.75 per share falls within this range.

Comparable Company Analysis

The Company will disclose that Lantern Hill performed a comparable company analysis in which Lantern Hill reviewed and compared certain financial information of the Company with corresponding financial information, ratios, and public market multiples for a group of selected publicly traded companies in the boutique hospitality and resort management sector. The selected comparable companies included:

• Quillon Corporation

• Strathmore Holdings

• Marlowe Partners LLC

• Calderon Enterprises

• Drayton Industries

• Bramwell Corporation

Lantern Hill reviewed enterprise value to LTM EBITDA multiples and enterprise value to LTM revenue multiples for the selected comparable companies. The observed EV/EBITDA multiples for the comparable companies ranged from approximately 5.8x to 10.2x, with a median of approximately 7.8x. The observed EV/Revenue multiples ranged from approximately 0.65x to 1.45x, with a median of approximately 1.05x. Lantern Hill selected a reference range of 6.0x to 9.0x EV/EBITDA and 0.75x to 1.25x EV/Revenue and applied those ranges to the Company's LTM EBITDA of $5,100,000 and LTM revenue of $38,700,000, respectively. After adjustments for net debt, the comparable company analysis yielded an implied per-share equity value range of approximately $3.45 to $5.70. The Company will note that the implied EV/EBITDA multiple of the transaction is approximately 7.5x (based on fiscal year 2021 LTM EBITDA of $5,100,000 and an implied enterprise value of $38,200,000), which falls within the range of multiples observed for the selected comparable companies.

Precedent Transaction Analysis

The Company will disclose that Lantern Hill performed a precedent transaction analysis in which Lantern Hill reviewed certain publicly available financial data for selected mergers, acquisitions, and other business combination transactions involving target companies in the hospitality and lodging sector. The selected precedent transactions included both strategic and private equity-sponsored acquisitions completed between January 2018 and March 2022, with target enterprise values between $25,000,000 and $200,000,000. Lantern Hill examined the implied EV/EBITDA multiples paid in such transactions, which ranged from approximately 6.0x to 12.5x, with a median of approximately 8.5x. After applying a selected reference range of 6.5x to 9.5x to the Company's LTM EBITDA and adjusting for net debt, the precedent transaction analysis yielded an implied per-share equity value range of approximately $3.70 to $5.95.

Premiums Paid Analysis

The Company will disclose that Lantern Hill performed an analysis of premiums paid in comparable take-private and going-private transactions involving U.S. publicly traded companies with enterprise values between $25,000,000 and $200,000,000 completed during the period from January 2019 to March 2022. Lantern Hill reviewed the premiums offered relative to the target company's unaffected stock price as of one day, one week, and one month prior to the public announcement or market awareness of the transaction. The observed one-day premiums ranged from approximately 20.0% to 75.0%, with a median of approximately 40.0%. The approximately 47.5% premium implied by the Merger Consideration relative to the Unaffected Price of $3.22 per share falls within the range and modestly above the median of the premiums observed in the selected transactions.

Scope of the Fairness Opinion

The Company will confirm in the Revised Proxy Statement that the Fairness Opinion, delivered by Lantern Hill to the Special Committee on April 22, 2022, addressed the fairness of the $4.75 per share cash Merger Consideration from a financial point of view to the holders of shares of CRFH common stock (other than Ardent Capital Partners III LP, CRFH Acquisition Sub, Inc., and their respective affiliates). The Fairness Opinion was provided for the benefit and use of the Special Committee in connection with its evaluation of the Merger and did not constitute a recommendation to any stockholder as to how to vote with respect to the Merger proposal or any other matter.

Fee Arrangements and Potential Conflicts

The Company will revise the disclosure to describe Lantern Hill's fee arrangements with the Company as follows:

• The Company engaged Lantern Hill pursuant to an engagement letter dated February 18, 2022. Under the engagement letter, the Company agreed to pay Lantern Hill a non-refundable cash retainer of $75,000, payable upon execution of the engagement letter and creditable against the success fee described below.

• In addition, the Company agreed to pay Lantern Hill a success fee of $300,000 (representing approximately 1.0% of the aggregate equity value of $30,000,000), payable in cash upon the consummation of the Merger.

• The Company acknowledges that a significant portion of Lantern Hill's total compensation under the engagement is contingent upon the consummation of the Merger, which creates a potential conflict of interest in that Lantern Hill has a financial incentive to render an opinion that is supportive of the transaction. The Special Committee was aware of this fee structure at the time it engaged Lantern Hill and at the time it received the Fairness Opinion, and considered such fee structure in evaluating the weight to be given to the Fairness Opinion. The Special Committee noted that contingent fee arrangements of this nature are customary in transactions of this type and size.

Material Relationships. The Company will confirm in the Revised Proxy Statement that, to the knowledge of the Company and based on information provided by Lantern Hill, Lantern Hill Advisory LLC had no material relationships with the Company, Ardent Capital Partners III LP, CRFH Acquisition Sub, Inc., or any of their respective affiliates during the two-year period preceding the date of the Fairness Opinion, other than the current engagement in connection with the Merger.

The full text of the written Fairness Opinion, which sets forth the assumptions made, procedures followed, matters considered, limitations on the scope of review, and qualifications and limitations of the Fairness Opinion, will be attached as Annex B to the Definitive Proxy Statement when filed. The enhanced disclosure regarding Lantern Hill's financial analyses will appear in the section of the Revised Proxy Statement captioned "Special Factors — Opinion of Lantern Hill Advisory LLC" (beginning on page 35) and in the "Summary Term Sheet — Fairness Opinion" (beginning on page 5).

Comment 4: Special Committee Process and Deliberations

The Staff notes that the Preliminary Proxy Statement describes the role of the Special Committee of the Board of Directors in evaluating and negotiating the proposed Merger. Please revise the disclosure to provide additional detail regarding the formation, composition, and deliberations of the Special Committee. In particular, please clarify the independence of each Special Committee member and the basis for each independence determination. In addition, please describe the material factors considered by the Special Committee in recommending the Merger to the full Board of Directors, including any factors that the Special Committee considered as potentially weighing against the transaction.

Response:

The Company acknowledges the Staff's comment and will revise the disclosure in the Revised Proxy Statement to provide substantially enhanced detail regarding the formation, composition, independence, deliberations, and conclusions of the Special Committee of the Board of Directors (the "Special Committee").

Formation. The Company will revise the disclosure to state that the Board of Directors formed the Special Committee on February 14, 2022, promptly following receipt of Ardent Capital Partners III LP's non-binding indication of interest dated February 11, 2022. The Board determined that, in light of the nature of the proposed transaction as a going-private transaction involving a financial sponsor, it was appropriate to form a special committee of independent directors to evaluate, negotiate, and make a recommendation to the full Board with respect to the proposed Merger. The Board granted the Special Committee full authority to evaluate the proposed transaction, negotiate the terms thereof (with the assistance of independent financial and legal advisors), and to recommend to the Board whether to approve or reject the transaction. The Board further authorized the Special Committee to determine not to proceed with the transaction if the Special Committee concluded, in its discretion, that the transaction was not in the best interests of the Company and its unaffiliated stockholders.

Composition. The Company will revise the disclosure to state that the Special Committee consists of three directors:

• Reginald Ashworth — Chair of the Board of Directors and Chair of the Special Committee. Mr. Ashworth has served on the Board since 2018 and serves as Chair of the Compensation Committee. He is a former Chief Operating Officer of a regional hotel management company and has no employment or consulting relationship with the Company.

• Diane Kowalski — Independent director and member of the Audit Committee. Ms. Kowalski has served on the Board since 2019 and has extensive experience in the hospitality sector, including prior service as Vice President, Finance at a publicly traded lodging REIT.

• Howard Tremaine — Independent director and member of the Nominating and Governance Committee. Mr. Tremaine has served on the Board since 2020 and has significant experience in mergers and acquisitions, having served as a managing director at a national investment bank prior to retirement.

The Company will further disclose the following information regarding the directors who were not appointed to the Special Committee:

• Marcus Ellender — CEO and Co-Founder of the Company and a member of the Board of Directors. Mr. Ellender was excluded from the Special Committee due to his position as the Company's Chief Executive Officer and his indirect economic interest in the Company through the Ellender Family Trust, which holds approximately 1,155,789 shares of CRFH common stock (representing approximately 18.3% of the total shares outstanding). The Board determined that Mr. Ellender's dual role as a member of management and a significant stockholder, together with certain discussions between Mr. Ellender and representatives of Ardent Capital regarding his potential post-closing role with the surviving company, created the appearance of interests that could differ from those of the Company's unaffiliated public stockholders and warranted his exclusion from the Special Committee.

• Sandra Maldonado — Independent director and Chair of the Audit Committee. Ms. Maldonado was not appointed to the Special Committee in order to maintain a committee of manageable size; however, Ms. Maldonado was not precluded from attending meetings of the full Board at which the proposed Merger was discussed, and she participated in the Board's deliberations regarding the transaction.

Independence Determination. The Company will revise the disclosure to state that each member of the Special Committee was determined by the Board of Directors to satisfy the following independence criteria:

(a) Each member qualifies as an "independent director" under Nasdaq Listing Rule 5605(a)(2), meaning that the Board has affirmatively determined that such director has no relationship with the Company (directly or as a partner, shareholder, or officer of an entity that has a relationship with the Company) that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.

(b) No member of the Special Committee has any material financial interest in the proposed Merger that differs from the interests of the Company's public stockholders generally. Each member will receive the same $4.75 per share cash Merger Consideration for his or her shares of CRFH common stock (if any) as all other stockholders, and none of the members has any agreement with, or financial interest in, Ardent Capital, Merger Sub, or any of their affiliates.

(c) No member of the Special Committee has any family relationship, employment relationship, consulting arrangement, or other business or personal relationship with Ardent Capital Partners III LP, Ardent Capital GP III LLC, or any of their respective directors, officers, partners, members, or affiliates.

Advisors. The Company will revise the disclosure to describe the independent advisors retained in connection with the Special Committee's evaluation of the Merger:

• Financial Advisor: The Special Committee retained Lantern Hill Advisory LLC as its independent financial advisor. The engagement was led by Evan Nakashima, Managing Director. Lantern Hill was engaged to provide financial advisory services to the Special Committee, including the rendering of a fairness opinion with respect to the Merger Consideration.

• Legal Counsel: The Company was represented by Whitfield, Crane & Sato LLP, led by Catherine Osei, Partner, M&A, as outside legal counsel to the Company in connection with the Merger. Whitfield, Crane & Sato advised the Special Committee and the Board on the legal aspects of the proposed transaction, including the negotiation and drafting of the Merger Agreement and related transaction documents.

Deliberations. The Company will revise the disclosure to describe the material meetings and deliberations of the Special Committee in connection with the proposed Merger. From formation on February 14, 2022 through execution of the Merger Agreement on April 25, 2022, the Special Committee held 11 formal meetings, each of which included participation by representatives of Lantern Hill and/or Whitfield, Crane & Sato. In addition, the members of the Special Committee engaged in numerous informal discussions and communications among themselves and with advisors throughout the process. The Company will describe the evolution of the transaction as follows:

• On February 11, 2022, Ardent Capital Partners III LP submitted a non-binding indication of interest to acquire 100% of the outstanding shares of CRFH common stock at a price of $4.25 per share in cash.

• At its first meeting on February 14, 2022, the Special Committee discussed the IOI with counsel and determined to engage Lantern Hill as its financial advisor, and to instruct Lantern Hill to evaluate the adequacy of the proposed per-share price and to assess the Company's standalone value.

• Over the ensuing weeks, the Special Committee and its advisors engaged in a series of negotiations with Ardent Capital and its advisors regarding the per-share price and the terms of the proposed Merger Agreement. On March 4, 2022, Ardent Capital revised its indication of interest to $4.40 per share, and on March 18, 2022, further revised its indication to $4.60 per share.

• On March 28, 2022, following continued negotiations directed by the Special Committee, Ardent Capital submitted a revised binding offer of $4.75 per share in cash, representing a premium of approximately 47.5% to the Unaffected Price and representing a 10.3% increase from Ardent Capital's initial offer of $4.25 per share.

• The Special Committee deliberated regarding the $4.75 per share offer at meetings held on April 1, 2022, April 8, 2022, and April 15, 2022. During this period, the Special Committee and its advisors continued to negotiate the terms of the Merger Agreement, including the non-solicitation provisions, the Go-Shop Period, the Company Termination Fee, the Reverse Termination Fee, the conditions to closing, and the limited guarantee.

• On April 22, 2022, Lantern Hill delivered its Fairness Opinion to the Special Committee, opining that, as of such date and based upon and subject to the assumptions, qualifications, and limitations set forth therein, the $4.75 per share cash Merger Consideration was fair, from a financial point of view, to the holders of CRFH common stock (other than Ardent Capital, Merger Sub, and their respective affiliates).

• On April 25, 2022, the Special Committee held a final meeting at which it unanimously voted to recommend that the full Board approve the Merger Agreement. The full Board (with Mr. Ellender recusing himself from the vote) thereafter unanimously approved the Merger Agreement, and the Merger Agreement was executed by the parties on April 25, 2022.

Factors in Favor of the Merger

The Company will revise the disclosure to describe the material factors considered by the Special Committee in reaching its determination to recommend the Merger to the full Board of Directors, including, among others:

• The premium of approximately 47.5% over the Unaffected Price of $3.22 per share, which the Special Committee considered to be meaningful and attractive in light of the Company's historical trading prices.

• The certainty of all-cash consideration of $4.75 per share, providing immediate and certain liquidity to stockholders without exposure to the risks of future Company performance, industry cyclicality, or stock market volatility.

• The Fairness Opinion of Lantern Hill Advisory LLC, delivered on April 22, 2022, that the $4.75 per share Merger Consideration was fair, from a financial point of view, to the holders of CRFH common stock (other than Ardent Capital, Merger Sub, and their respective affiliates).

• The results of the Go-Shop Period, during which Lantern Hill contacted 14 potentially interested parties and no Superior Proposal was received, which the Special Committee viewed as confirming the adequacy of the Merger Consideration.

• The implied valuation multiples, including an EV/EBITDA multiple of approximately 7.5x and an EV/Revenue multiple of approximately 0.99x, which the Special Committee viewed as within or near the ranges observed for comparable companies and precedent transactions.

• The Company's business outlook and risks, including the ongoing competitive pressures in the boutique hospitality market, rising labor and supply chain costs, the Company's need for capital investment in property renovations and maintenance, and the inherent cyclicality of the travel and hospitality industry, particularly in light of the uncertain macroeconomic environment.

• The terms of the Merger Agreement, including the customary fiduciary-out provisions that permit the Board to respond to unsolicited Superior Proposals, the 30-day Go-Shop Period, and the reasonable level of the Company Termination Fee.

• The absence of a financing condition, providing stockholders with greater closing certainty.

Factors Weighing Against the Merger

The Company will also disclose the factors that the Special Committee considered as potentially weighing against the Merger, including, among others:

• The all-cash nature of the Merger Consideration, which precludes the Company's existing stockholders from participating in any future appreciation in the value of the Company's business or assets following the closing of the Merger.

• The risks inherent in the hospitality industry and the potential for the Company's financial performance to improve, including the possibility that the Company's properties could benefit from the ongoing recovery in leisure travel demand, which could result in a higher standalone valuation in the future.

• The tax consequences to stockholders of the receipt of cash Merger Consideration, including the recognition of taxable gain by stockholders who have a tax basis in their shares below $4.75 per share.

• The restrictions on the Company's ability to solicit alternative acquisition proposals following the expiration of the Go-Shop Period, including the non-solicitation covenant and the Company Termination Fee of $900,000 and its potential deterrent effect on competing bids.

• The potential conflicts of interest arising from the contingent nature of Lantern Hill's compensation.

• The risks and costs associated with the Merger itself, including the potential disruption to the Company's business during the pendency of the transaction, the diversion of management attention, and the risk that the Merger might not be consummated.

• The effects of the announcement and pendency of the Merger on the Company's relationships with its employees, guests, vendors, and business partners.

Recommendation. The Company will confirm that, after careful consideration of all of the foregoing factors (both favorable and unfavorable), the Special Committee determined that, on balance, the potential benefits of the Merger to the Company's stockholders outweighed the potential detriments. Accordingly, the Special Committee unanimously recommended to the full Board of Directors that the Board approve and adopt the Merger Agreement and recommend that the Company's stockholders vote in favor of the proposal to adopt the Merger Agreement and approve the Merger.

This enhanced disclosure will appear in the sections of the Revised Proxy Statement captioned "Special Factors — Background of the Merger" (beginning on page 18), "Special Factors — Reasons for the Merger; Recommendation of the Special Committee and the Board of Directors" (beginning on page 30), and "Special Factors — Interests of Certain Persons in the Merger" (beginning on page 42).

Comment 5: Stockholder Approval Requirement and Voting

The Staff notes that the Preliminary Proxy Statement describes the stockholder approval required to consummate the Merger. Please revise the disclosure to clarify the specific stockholder approval threshold required, including the voting standard, the record date, and the treatment of abstentions and broker non-votes in the context of the applicable voting standard.

Response:

The Company acknowledges the Staff's comment and will revise the disclosure in the Revised Proxy Statement to provide enhanced clarity regarding the stockholder approval requirement and voting mechanics.

The Company will revise the disclosure to state that, pursuant to Section 251 of the Delaware General Corporation Law (the "DGCL") and the terms of the Merger Agreement, the adoption of the Merger Agreement and the approval of the Merger require the affirmative vote of the holders of a majority of the outstanding shares of CRFH common stock entitled to vote thereon. As of the record date, 6,315,789 shares of CRFH common stock are outstanding and entitled to vote at the Special Meeting. Accordingly, the adoption of the Merger Agreement and the approval of the Merger require the affirmative vote of at least 3,157,895 shares of CRFH common stock, regardless of the number of shares actually present in person or represented by proxy at the Special Meeting.

The Company will disclose that the Board of Directors has fixed June 24, 2022 as the record date (the "Record Date") for the determination of stockholders entitled to notice of and to vote at the Special Meeting of Stockholders (the "Special Meeting"). Only holders of record of shares of CRFH common stock at the close of business on the Record Date will be entitled to vote at the Special Meeting.

The Company will clarify that because the voting standard for adoption of the Merger Agreement is based on a majority of all outstanding shares of CRFH common stock (rather than a majority of shares present or represented at the Special Meeting), abstentions and broker non-votes will have the same practical effect as votes cast "AGAINST" the proposal to adopt the Merger Agreement and approve the Merger. A stockholder who fails to submit a proxy or fails to vote in person at the Special Meeting will also effectively have the same result as a vote "AGAINST" the Merger proposal.

The Company will also disclose the following information regarding significant stockholdings and voting commitments:

• Ellender Family Trust: The Ellender Family Trust, of which Marcus Ellender (CEO and Co-Founder of the Company) is the trustee and beneficiary, holds 1,155,789 shares of CRFH common stock, representing approximately 18.3% of the total shares outstanding as of the Record Date. The Ellender Family Trust has entered into a Voting and Support Agreement, dated as of April 25, 2022, with Ardent Capital Partners III LP, pursuant to which the Ellender Family Trust has agreed, among other things, to vote all of its shares of CRFH common stock in favor of the proposal to adopt the Merger Agreement and approve the Merger, subject to certain customary exceptions and termination provisions.

• Tidewater Asset Management LLC: Based on the most recent Schedule 13G filed with the Commission, Tidewater Asset Management LLC holds approximately 612,632 shares of CRFH common stock, representing approximately 9.7% of the total shares outstanding. Tidewater Asset Management LLC is not a party to any voting agreement in connection with the Merger.

• Broadleaf Institutional Partners LP: Based on the most recent Schedule 13G filed with the Commission, Broadleaf Institutional Partners LP holds approximately 448,421 shares of CRFH common stock, representing approximately 7.1% of the total shares outstanding. Broadleaf Institutional Partners LP is not a party to any voting agreement in connection with the Merger.

The Company will further note that it has engaged Meridian Proxy Services Inc. as proxy solicitor to assist in the solicitation of proxies in connection with the Special Meeting. Meridian Proxy Services will contact stockholders, banks, brokers, and other nominees to assist in the solicitation process.

This enhanced disclosure will appear in the sections of the Revised Proxy Statement captioned "The Special Meeting — Record Date and Voting" (beginning on page 12), "The Special Meeting — Required Vote" (beginning on page 14), "The Special Meeting — Abstentions and Broker Non-Votes" (beginning on page 15), and "Security Ownership of Certain Beneficial Owners and Management" (beginning on page 68).

Comment 6: Sources of Funding and Financing Conditions

The Staff notes that the Preliminary Proxy Statement describes the sources of funds for the Merger. Please revise the disclosure to provide enhanced detail regarding the sources of funds for the payment of the merger consideration, including the terms of any debt financing commitment and any conditions to funding. In addition, please describe the consequences to the Company and its stockholders in the event the financing is not obtained.

Response:

The Company acknowledges the Staff's comment and will revise the disclosure in the Revised Proxy Statement to provide enhanced detail regarding the sources and uses of funds for the Merger and the consequences of a potential financing failure.

The Company will revise the disclosure to describe the sources and uses of funds as follows:

Sources of Funds

Uses of Funds

Debt Financing Terms

The Company will revise the disclosure to describe the terms of the senior secured term loan facility as follows:

• Lender: Pinnacle Commercial Lending Corp.

• Commitment Letter: Dated April 8, 2022 (Reference No. PCL-2022-SF-0417).

• Facility Amount: $10,000,000 senior secured term loan facility.

• Interest Rate: Secured Overnight Financing Rate ("SOFR") plus 425 basis points per annum.

• Maturity: Five years from the closing date of the Merger.

• Original Issue discount: 1.0%.

• Security: First-priority lien on substantially all assets of Coral Reef Hospitality Group, Inc. (as the surviving entity in the Merger) and its subsidiaries following the closing of the Merger.

• Conditions to Funding: The funding of the term loan facility is subject to customary conditions, including (i) the execution and delivery of definitive credit documentation, (ii) the accuracy of representations and warranties in all material respects, (iii) the absence of a material adverse effect on the Company, (iv) the consummation of the Merger substantially simultaneously with the funding, and (v) the delivery of customary closing documents, officer's certificates, and legal opinions.

Absence of Financing Condition

The Company will prominently disclose that the obligation of Ardent Capital Partners III LP and Merger Sub to consummate the Merger is not subject to a financing condition. Specifically, Ardent Capital's obligation to close the Merger pursuant to the Merger Agreement is not conditioned upon the receipt of the debt financing described above or any other financing. Accordingly, even in the event that the debt financing from Pinnacle Commercial Lending Corp. is not available at the closing of the Merger, Ardent Capital remains obligated under the Merger Agreement to consummate the Merger and pay the Merger Consideration, subject to the satisfaction or waiver of the other conditions to closing set forth in the Merger Agreement.

Limited Guarantee and Reverse Termination Fee

The Company will revise the disclosure to describe the limited guarantee and the Reverse Termination Fee as follows:

• Limited Guarantee: In connection with the execution of the Merger Agreement, Ardent Capital GP III LLC (the general partner of Ardent Capital Partners III LP) has delivered a limited guarantee (the "Limited Guarantee") to the Company, guaranteeing Ardent Capital's payment obligations under the Merger Agreement up to a maximum aggregate amount equal to the Reverse Termination Fee of $1,200,000. The maximum aggregate liability of Ardent Capital GP III LLC under the Limited Guarantee is capped at $1,200,000 and does not extend to any other obligations of Ardent Capital under the Merger Agreement. The Limited Guarantee is the sole recourse of the Company against Ardent Capital GP III LLC in the event of a breach by Ardent Capital of its obligations under the Merger Agreement.

• Reverse Termination Fee: Pursuant to Article VII of the Merger Agreement, if the Merger Agreement is terminated under certain specified circumstances — including, without limitation, (a) a termination by the Company if Ardent Capital or Merger Sub has breached or failed to perform any of its representations, warranties, covenants, or agreements under the Merger Agreement and such breach is not cured within 20 business days following written notice thereof (or is incapable of being cured), and such breach would result in a failure of the conditions to the Company's obligation to close, or (b) a termination by the Company or Ardent Capital if the Merger has not been consummated by the Outside Date and the failure to consummate the Merger by such date was caused by a failure of Ardent Capital or Merger Sub to fulfill their obligations under the Merger Agreement (including a failure to obtain financing) — then Ardent Capital is obligated to pay to the Company a Reverse Termination Fee of $1,200,000 in cash (the "Reverse Termination Fee"), representing approximately 4.0% of the aggregate equity value of $30,000,000. The payment of the Reverse Termination Fee constitutes the sole and exclusive remedy of the Company and its stockholders against Ardent Capital, Merger Sub, and Ardent Capital GP III LLC for any loss or damage suffered as a result of such termination circumstances, subject to limited exceptions for fraud or willful and material breach.

Consequences of Financing Failure

The Company will disclose that, in the event the debt financing from Pinnacle Commercial Lending Corp. is not available at the time of closing, Ardent Capital would be required to fund the full Merger Consideration and estimated transaction expenses from its equity commitment and any alternative financing it may arrange. If Ardent Capital fails to consummate the Merger for any reason, including a financing failure, the Company's sole monetary remedy would be the receipt of the Reverse Termination Fee of $1,200,000, and the Company's stockholders would not receive the $4.75 per share Merger Consideration. The Company will note that, while the absence of a financing condition is intended to provide the Company and its stockholders with enhanced closing certainty, there can be no assurance that Ardent Capital will have sufficient funds to consummate the Merger if the debt financing is not obtained, and the Company's recourse in such circumstance is limited to the Reverse Termination Fee as guaranteed under the Limited Guarantee.

This enhanced disclosure will appear in the sections of the Revised Proxy Statement captioned "Special Factors — Sources of Funds for the Merger" (beginning on page 45), "The Merger Agreement — Financing; Financing Cooperation" (beginning on page 58), "The Merger Agreement — Termination; Termination Fees" (beginning on page 62), and "The Merger Agreement — Limited Guarantee" (beginning on page 65).

The Company believes the foregoing responses fully address each of the Staff's comments set forth in the Comment Letter dated June 3, 2022. The Company intends to file the Revised Proxy Statement on Schedule 14A, incorporating the revisions described herein, with the Commission on or about June 17, 2022. Following the Staff's review and clearance of the Revised Proxy Statement, the Company will seek to file a definitive proxy statement on Schedule 14A and will commence distribution of the definitive proxy materials to stockholders of record as of the Record Date.

Should the Staff have any additional questions or comments regarding the foregoing responses or the Preliminary Proxy Statement, we respectfully request that the Staff contact the undersigned or the Company's outside counsel at the following addresses:

Patricia Sung Chief Financial Officer Coral Reef Hospitality Group, Inc. 2400 Bayshore Boulevard, Suite 300 Tampa, FL 33629 Telephone: (813) 555-2400

Email: psung@coralreefhospitality.com

Catherine Osei Partner, Mergers & Acquisitions Whitfield, Crane & Sato LLP One Southeast Financial Center, Suite 4200 Miami, FL 33131 Telephone: (305) 555-6800

Email: cosei@whitfieldcrane.com

Harrison Wexford Partner, Corporate Calderwood & Harkness LLP 1301 Avenue of the Americas, 40th Floor New York, NY 10019 Telephone: (212) 555-4100

Email: hwexford@calderwoodharkness.com

In connection with this response, the Company acknowledges the following:

• The Company is responsible for the accuracy and adequacy of the disclosures contained in its filings with the Commission.

• Comments of the Staff, or changes made to the Company's disclosure in response to Staff comments, do not foreclose the Commission from taking any action with respect to the filing.

• The Company may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

Respectfully submitted,

CORAL REEF HOSPITALITY GROUP, INC.

By: ________

Name: Patricia Sung

Title: Chief Financial Officer

Date: June 14, 2022

This letter has been prepared by Calderwood & Harkness LLP, in coordination with Whitfield, Crane & Sato LLP, on behalf of Coral Reef Hospitality Group, Inc., and is submitted by Patricia Sung, Chief Financial Officer, on behalf of the registrant.

cc:

Reginald Ashworth, Board Chair & Special Committee Chair, Coral Reef Hospitality Group, Inc. Marcus Ellender, CEO, Coral Reef Hospitality Group, Inc. Catherine Osei, Partner, Whitfield, Crane & Sato LLP Robert Whitfield III, Partner, Whitfield, Crane & Sato LLP Harrison Wexford, Partner, Calderwood & Harkness LLP Beatrice Holloway, Counsel, Calderwood & Harkness LLP Megan Chu, Associate, Calderwood & Harkness LLP

Source	Amount
Ardent Capital Partners III LP — Equity Contribution	$22,500,000
Pinnacle Commercial Lending Corp. — Senior Secured Term Loan	$10,000,000
Total Sources	$32,500,000
Use	Amount
Payment of Merger Consideration to CRFH Stockholders ($4.75 × 6,315,789 shares)	$30,000,000
Estimated Transaction Expenses (advisory fees, legal fees, filing fees, proxy solicitation fees, and other closing costs)	$2,500,000
Total Uses	$32,500,000

PRIVILEGED & CONFIDENTIAL — ATTORNEY WORK PRODUCT — FOR REVIEW PURPOSES ONLY — NOT FOR FILING UNTIL APPROVED BY CLIENT
CORAL REEF HOSPITALITY GROUP, INC. 2400 Bayshore Boulevard, Suite 300 Tampa, FL 33629
June 14, 2022
VIA EDGAR CORRESPONDENCE FILING
Division of Corporation Finance Office of Mergers & Acquisitions U.S. Securities and Exchange Commission 100 F Street, N.E. Washington, D.C. 20549
Re: Coral Reef Hospitality Group, Inc. Preliminary Proxy Statement on Schedule 14A Filed May 10, 2022 SEC File No. 001-38742 CUSIP 21874R109 Nasdaq Capital Market Ticker: CRFH
Ladies and Gentlemen:
On behalf of Coral Reef Hospitality Group, Inc. (the "Company" or "CRFH"), we are writing in response to the comment letter of the staff (the "Staff") of the Division of Corporation Finance of the U.S. Securities and Exchange Commission (the "Commission"), dated June 3, 2022 (the "Comment Letter"), relating to the Company's preliminary proxy statement on Schedule 14A (the "Preliminary Proxy Statement"), filed with the Commission on May 10, 2022. The Preliminary Proxy Statement was filed in connection with the proposed merger (the "Merger") of CRFH Acquisition Sub, Inc. ("Merger Sub"), a wholly owned subsidiary of Ardent Capital Partners III LP ("Ardent Capital"), with and into the Company, pursuant to that certain Agreement and Plan of Merger, dated as of April 25, 2022, by and among the Company, Merger Sub, and Ardent Capital (the "Merger Agreement").
This letter has been prepared by Calderwood & Harkness LLP (1301 Avenue of the Americas, 40th Floor, New York, NY 10019), in coordination with Whitfield, Crane & Sato LLP (One Southeast Financial Center, Suite 4200, Miami, FL 33131), each acting as outside counsel on behalf of the Company.
For the convenience of the Staff, we have reproduced below, in bold text, the full text of each of the Staff's comments from the Comment Letter, followed in each instance by the Company's response. Unless otherwise indicated, all page references in this letter are to the pages of the Preliminary Proxy Statement as filed on May 10, 2022. The Company intends to file a revised preliminary proxy statement on Schedule 14A (the "Revised Proxy Statement") incorporating the revisions described in this letter on or about June 17, 2022. All capitalized terms used but not otherwise defined in this letter have the meanings ascribed to such terms in the Preliminary Proxy Statement.
Comment 1: Merger Consideration and Premium Disclosure
The Staff notes that the Preliminary Proxy Statement discloses that the merger consideration is $4.75 per share in cash. Please revise the disclosure to provide enhanced detail regarding the basis for the $4.75 per share all-cash merger consideration. In particular, please clarify the premium calculation, including identification of the unaffected trading price and the specific date used to calculate the premium. Additionally, please disclose the aggregate equity value implied by the per-share merger consideration and the number of shares of common stock outstanding used in such calculation.
Response:
The Company acknowledges the Staff's comment and will revise the disclosure in the Revised Proxy Statement to provide enhanced detail regarding the merger consideration and the premium implied thereby.
Specifically, the Company will revise the disclosure to state that the merger consideration of $4.75 per share in cash (the "Merger Consideration") represents a premium of approximately 47.5% over the closing price of the Company's common stock of $3.22 per share on the Nasdaq Capital Market on February 10, 2022, the last full trading day prior to Ardent Capital Partners III LP's submission of its non-binding indication of interest (the "IOI") on February 11, 2022 (such closing price, the "Unaffected Price"). The Company selected February 10, 2022 as the reference date for purposes of the premium calculation because it represents the last trading day on which the Company's stock price was not potentially affected by market awareness of, or speculation regarding, the possibility of a strategic transaction involving the Company.
The Company will further clarify that, as of the date of the Merger Agreement, there were 6,315,789 shares of CRFH common stock, par value $0.0001 per share, issued and outstanding. No shares of the Company's preferred stock were issued or outstanding as of such date. Accordingly, the Merger Consideration of $4.75 per share implies an aggregate equity value of approximately $30,000,000 (calculated as 6,315,789 shares multiplied by $4.75 per share).
In addition, the Company will provide the following contextual information to enable stockholders to evaluate the Merger Consideration in relation to the Company's pre-announcement market valuation and enterprise value:
•  The Company's unaffected market capitalization, calculated using the Unaffected Price of $3.22 per share and 6,315,789 shares outstanding, was approximately $20,336,840.
•  The implied enterprise value of the Company, based on the Merger Consideration, is approximately $38,200,000, calculated as the sum of the aggregate equity value of $30,000,000 plus net debt of approximately $8,200,000. Net debt is calculated as total consolidated debt of approximately $11,400,000 less cash and cash equivalents of approximately $3,200,000, each as reported in the Company's audited consolidated balance sheet as of December 31, 2021.
•  The implied enterprise value of approximately $38,200,000 represents an EV/EBITDA multiple of approximately 7.5x based on the Company's last twelve months ("LTM") Adjusted EBITDA of approximately $5,100,000 for the fiscal year ended December 31, 2021.
•  The implied enterprise value represents an EV/Revenue multiple of approximately 0.99x based on LTM revenue of approximately $38,700,000 for the fiscal year ended December 31, 2021.
This enhanced disclosure will appear in the sections of the Revised Proxy Statement captioned "Summary Term Sheet — The Merger Consideration" (beginning on page 3), "Special Factors — Merger Consideration and Premium" (beginning on page 22), and "Special Factors — Opinion of Lantern Hill Advisory LLC" (beginning on page 35), as well as in the "Questions and Answers" section beginning on page 7 of the Revised Proxy Statement.
Comment 2: Background of the Merger — Go-Shop Process
The Staff notes that the Preliminary Proxy Statement describes a 30-day "go-shop" period under the Merger Agreement. Please revise the disclosure to provide additional detail regarding the go-shop period, including the number of parties contacted during the go-shop period, the nature and scope of the outreach conducted, and the results of that outreach. In addition, please clarify the specific start and end dates of the go-shop period and whether any "Superior Proposals" (as defined in the Merger Agreement) were received during the go-shop period. Finally, please describe the transition from the go-shop period to the no-shop (non-solicitation) covenant under the Merger Agreement and the terms of such non-solicitation covenant.
Response:
The Company acknowledges the Staff's comment and will revise the disclosure in the Revised Proxy Statement to provide substantially enhanced detail regarding the go-shop process and the transition to the non-solicitation covenant.
The Company will revise the disclosure to specify that the go-shop period commenced upon execution of the Merger Agreement on April 25, 2022 and expired at 11:59 p.m. Eastern Time on May 25, 2022, comprising a period of 30 calendar days (the "Go-Shop Period"). During the Go-Shop Period, the Company and its representatives, including the Special Committee and its independent financial advisor, Lantern Hill Advisory LLC ("Lantern Hill"), were permitted to actively solicit, initiate, facilitate, encourage, and negotiate alternative acquisition proposals from third parties.
The Company will revise the disclosure to describe the go-shop process in the following enhanced detail:
•  Under the direction and supervision of the Special Committee, Lantern Hill, led by Managing Director Evan Nakashima, conducted an active outreach process during the Go-Shop Period. In total, Lantern Hill contacted 14 potentially interested parties, consisting of seven strategic parties (companies operating in the hospitality, resort management, and lodging sectors) and seven financial sponsors (private equity firms and family offices with demonstrated interest in hospitality-related assets).
•  Of the 14 parties contacted, five parties (three strategic and two financial) executed confidentiality agreements and received access to a virtual data room containing due diligence materials prepared by the Company and its advisors. The remaining nine parties either declined to participate or did not respond to Lantern Hill's outreach within a commercially reasonable time frame.
•  Of the five parties that accessed the virtual data room, two parties — one strategic buyer and one financial sponsor — submitted preliminary, non-binding indications of interest during the Go-Shop Period. However, neither of these indications of interest proposed consideration that the Special Committee, after consultation with Lantern Hill and legal counsel, determined to be reasonably likely to lead to a "Superior Proposal" as defined in Article VI, Section 6.5(e) of the Merger Agreement. Specifically, the strategic buyer's indication reflected an implied per-share value range of $3.80 to $4.20, which was below the Merger Consideration of $4.75 per share, and was subject to significant due diligence, financing, and regulatory conditions. The financial sponsor's indication reflected an implied per-share value in the range of $4.00 to $4.50, which was also below the Merger Consideration and was subject to completion of confirmatory due diligence and financing.
•  No party submitted a proposal that constituted a "Superior Proposal" as defined in the Merger Agreement during the Go-Shop Period. Accordingly, the Company did not designate any party as an "Excluded Party" entitled to continue discussions beyond the expiration of the Go-Shop Period.
The Company will further revise the disclosure to clarify that upon expiration of the Go-Shop Period at 11:59 p.m. Eastern Time on May 25, 2022, the non-solicitation covenant set forth in Article VI, Section 6.5(b) of the Merger Agreement became effective. Pursuant to the non-solicitation covenant, the Company, its directors, officers, employees, and representatives are restricted from, directly or indirectly, soliciting, initiating, knowingly encouraging, or knowingly facilitating any inquiry, proposal, or offer that constitutes, or would reasonably be expected to lead to, an alternative "Acquisition Proposal" (as defined in the Merger Agreement). The Company is also prohibited from furnishing any non-public information to any third party in connection with an Acquisition Proposal, or entering into, participating in, or continuing any discussions or negotiations with any third party with respect to an Acquisition Proposal.
The non-solicitation covenant is subject to customary "fiduciary-out" provisions, as set forth in Article VI, Section 6.5(c) of the Merger Agreement, which permit the Board of Directors (acting upon the recommendation of the Special Committee) to engage with an unsolicited Acquisition Proposal if the Board determines in good faith (after consultation with its outside financial advisor and outside legal counsel) that such proposal constitutes or would reasonably be expected to lead to a Superior Proposal, and that the failure to take such action would be inconsistent with the directors' fiduciary duties under applicable law. The Board is required to provide Ardent Capital with written notice of its receipt of a Superior Proposal and to afford Ardent Capital a five-business-day "match right" period during which Ardent Capital may propose amendments to the terms of the Merger Agreement.
The Company will also disclose that the Merger Agreement provides for a Company Termination Fee of $900,000 (representing approximately 3.0% of the aggregate equity value of $30,000,000), payable by the Company to Ardent Capital if the Merger Agreement is terminated in certain circumstances, including a termination by the Company in order to accept a Superior Proposal. During the Go-Shop Period, the applicable termination fee was reduced to $600,000 (representing approximately 2.0% of the aggregate equity value), in order to encourage potential alternative bidders to submit proposals during the Go-Shop Period without an undue deterrent. Upon expiration of the Go-Shop Period without the designation of any Excluded Party, the full Company Termination Fee of $900,000 became applicable.
This enhanced disclosure will appear in the sections of the Revised Proxy Statement captioned "Background of the Merger — Go-Shop Process" (beginning on page 28), "The Merger Agreement — Non-Solicitation; Superior Proposals" (beginning on page 56), and "The Merger Agreement — Termination Fees" (beginning on page 62).
Comment 3: Fairness Opinion of Lantern Hill Advisory LLC
The Staff notes that the Preliminary Proxy Statement includes a summary of the fairness opinion delivered by Lantern Hill Advisory LLC to the Special Committee of the Board of Directors. Please revise the disclosure to provide enhanced detail regarding the financial analyses performed by Lantern Hill Advisory LLC in connection with its fairness opinion, including the specific valuation methodologies used, the key assumptions underlying each methodology, and the resulting valuation ranges. In addition, please clarify whether the fairness opinion addressed the fairness of the $4.75 per share merger consideration from a financial point of view to the holders of CRFH common stock (other than Ardent Capital Partners III LP and its affiliates). Finally, please disclose any material relationships between Lantern Hill Advisory LLC and the Company or its affiliates during the two years preceding the date of the opinion, and the fee arrangements between Lantern Hill and the Company.
Response:
The Company acknowledges the Staff's comment and will revise the disclosure in the Revised Proxy Statement to provide substantially enhanced detail regarding the financial analyses performed by Lantern Hill Advisory LLC in connection with its fairness opinion (the "Fairness Opinion"), which was delivered to the Special Committee on April 22, 2022.
The Company will revise the disclosure to describe each of the principal valuation methodologies employed by Lantern Hill in its financial analyses, as summarized below:
Discounted Cash Flow Analysis
The Company will disclose that Lantern Hill performed a discounted cash flow ("DCF") analysis of the Company based on management projections of the Company's unlevered free cash flows for fiscal years 2022 through 2026, as prepared by the Company's management and approved by the Special Committee for use by Lantern Hill (the "Management Projections"). Lantern Hill calculated the present value of the Company's projected unlevered free cash flows using discount rates ranging from 12.0% to 15.0%, reflecting Lantern Hill's estimate of the Company's weighted average cost of capital based on, among other things, the capital asset pricing model, the Company's capital structure, comparable company betas, and a size premium reflecting the Company's small capitalization. Terminal values were calculated using a perpetuity growth methodology, applying a terminal growth rate of 2.0% to 3.0%, as well as an alternative exit multiple methodology, applying terminal EV/EBITDA multiples of 6.5x to 8.5x to the Company's projected fiscal year 2026 EBITDA. The DCF analysis yielded an implied per-share equity value range of approximately $3.95 to $5.40. The Merger Consideration of $4.75 per share falls within this range.
Comparable Company Analysis
The Company will disclose that Lantern Hill performed a comparable company analysis in which Lantern Hill reviewed and compared certain financial information of the Company with corresponding financial information, ratios, and public market multiples for a group of selected publicly traded companies in the boutique hospitality and resort management sector. The selected comparable companies included:
•  Quillon Corporation
•  Strathmore Holdings
•  Marlowe Partners LLC
•  Calderon Enterprises
•  Drayton Industries
•  Bramwell Corporation
Lantern Hill reviewed enterprise value to LTM EBITDA multiples and enterprise value to LTM revenue multiples for the selected comparable companies. The observed EV/EBITDA multiples for the comparable companies ranged from approximately 5.8x to 10.2x, with a median of approximately 7.8x. The observed EV/Revenue multiples ranged from approximately 0.65x to 1.45x, with a median of approximately 1.05x. Lantern Hill selected a reference range of 6.0x to 9.0x EV/EBITDA and 0.75x to 1.25x EV/Revenue and applied those ranges to the Company's LTM EBITDA of $5,100,000 and LTM revenue of $38,700,000, respectively. After adjustments for net debt, the comparable company analysis yielded an implied per-share equity value range of approximately $3.45 to $5.70. The Company will note that the implied EV/EBITDA multiple of the transaction is approximately 7.5x (based on fiscal year 2021 LTM EBITDA of $5,100,000 and an implied enterprise value of $38,200,000), which falls within the range of multiples observed for the selected comparable companies.
Precedent Transaction Analysis
The Company will disclose that Lantern Hill performed a precedent transaction analysis in which Lantern Hill reviewed certain publicly available financial data for selected mergers, acquisitions, and other business combination transactions involving target companies in the hospitality and lodging sector. The selected precedent transactions included both strategic and private equity-sponsored acquisitions completed between January 2018 and March 2022, with target enterprise values between $25,000,000 and $200,000,000. Lantern Hill examined the implied EV/EBITDA multiples paid in such transactions, which ranged from approximately 6.0x to 12.5x, with a median of approximately 8.5x. After applying a selected reference range of 6.5x to 9.5x to the Company's LTM EBITDA and adjusting for net debt, the precedent transaction analysis yielded an implied per-share equity value range of approximately $3.70 to $5.95.
Premiums Paid Analysis
The Company will disclose that Lantern Hill performed an analysis of premiums paid in comparable take-private and going-private transactions involving U.S. publicly traded companies with enterprise values between $25,000,000 and $200,000,000 completed during the period from January 2019 to March 2022. Lantern Hill reviewed the premiums offered relative to the target company's unaffected stock price as of one day, one week, and one month prior to the public announcement or market awareness of the transaction. The observed one-day premiums ranged from approximately 20.0% to 75.0%, with a median of approximately 40.0%. The approximately 47.5% premium implied by the Merger Consideration relative to the Unaffected Price of $3.22 per share falls within the range and modestly above the median of the premiums observed in the selected transactions.
Scope of the Fairness Opinion
The Company will confirm in the Revised Proxy Statement that the Fairness Opinion, delivered by Lantern Hill to the Special Committee on April 22, 2022, addressed the fairness of the $4.75 per share cash Merger Consideration from a financial point of view to the holders of shares of CRFH common stock (other than Ardent Capital Partners III LP, CRFH Acquisition Sub, Inc., and their respective affiliates). The Fairness Opinion was provided for the benefit and use of the Special Committee in connection with its evaluation of the Merger and did not constitute a recommendation to any stockholder as to how to vote with respect to the Merger proposal or any other matter.
Fee Arrangements and Potential Conflicts
The Company will revise the disclosure to describe Lantern Hill's fee arrangements with the Company as follows:
•  The Company engaged Lantern Hill pursuant to an engagement letter dated February 18, 2022. Under the engagement letter, the Company agreed to pay Lantern Hill a non-refundable cash retainer of $75,000, payable upon execution of the engagement letter and creditable against the success fee described below.
•  In addition, the Company agreed to pay Lantern Hill a success fee of $300,000 (representing approximately 1.0% of the aggregate equity value of $30,000,000), payable in cash upon the consummation of the Merger.
•  The Company acknowledges that a significant portion of Lantern Hill's total compensation under the engagement is contingent upon the consummation of the Merger, which creates a potential conflict of interest in that Lantern Hill has a financial incentive to render an opinion that is supportive of the transaction. The Special Committee was aware of this fee structure at the time it engaged Lantern Hill and at the time it received the Fairness Opinion, and considered such fee structure in evaluating the weight to be given to the Fairness Opinion. The Special Committee noted that contingent fee arrangements of this nature are customary in transactions of this type and size.
Material Relationships.  The Company will confirm in the Revised Proxy Statement that, to the knowledge of the Company and based on information provided by Lantern Hill, Lantern Hill Advisory LLC had no material relationships with the Company, Ardent Capital Partners III LP, CRFH Acquisition Sub, Inc., or any of their respective affiliates during the two-year period preceding the date of the Fairness Opinion, other than the current engagement in connection with the Merger.
The full text of the written Fairness Opinion, which sets forth the assumptions made, procedures followed, matters considered, limitations on the scope of review, and qualifications and limitations of the Fairness Opinion, will be attached as Annex B to the Definitive Proxy Statement when filed. The enhanced disclosure regarding Lantern Hill's financial analyses will appear in the section of the Revised Proxy Statement captioned "Special Factors — Opinion of Lantern Hill Advisory LLC" (beginning on page 35) and in the "Summary Term Sheet — Fairness Opinion" (beginning on page 5).
Comment 4: Special Committee Process and Deliberations
The Staff notes that the Preliminary Proxy Statement describes the role of the Special Committee of the Board of Directors in evaluating and negotiating the proposed Merger. Please revise the disclosure to provide additional detail regarding the formation, composition, and deliberations of the Special Committee. In particular, please clarify the independence of each Special Committee member and the basis for each independence determination. In addition, please describe the material factors considered by the Special Committee in recommending the Merger to the full Board of Directors, including any factors that the Special Committee considered as potentially weighing against the transaction.
Response:
The Company acknowledges the Staff's comment and will revise the disclosure in the Revised Proxy Statement to provide substantially enhanced detail regarding the formation, composition, independence, deliberations, and conclusions of the Special Committee of the Board of Directors (the "Special Committee").
Formation.  The Company will revise the disclosure to state that the Board of Directors formed the Special Committee on February 14, 2022, promptly following receipt of Ardent Capital Partners III LP's non-binding indication of interest dated February 11, 2022. The Board determined that, in light of the nature of the proposed transaction as a going-private transaction involving a financial sponsor, it was appropriate to form a special committee of independent directors to evaluate, negotiate, and make a recommendation to the full Board with respect to the proposed Merger. The Board granted the Special Committee full authority to evaluate the proposed transaction, negotiate the terms thereof (with the assistance of independent financial and legal advisors), and to recommend to the Board whether to approve or reject the transaction. The Board further authorized the Special Committee to determine not to proceed with the transaction if the Special Committee concluded, in its discretion, that the transaction was not in the best interests of the Company and its unaffiliated stockholders.
Composition.  The Company will revise the disclosure to state that the Special Committee consists of three directors:
•  Reginald Ashworth — Chair of the Board of Directors and Chair of the Special Committee. Mr. Ashworth has served on the Board since 2018 and serves as Chair of the Compensation Committee. He is a former Chief Operating Officer of a regional hotel management company and has no employment or consulting relationship with the Company.
•  Diane Kowalski — Independent director and member of the Audit Committee. Ms. Kowalski has served on the Board since 2019 and has extensive experience in the hospitality sector, including prior service as Vice President, Finance at a publicly traded lodging REIT.
•  Howard Tremaine — Independent director and member of the Nominating and Governance Committee. Mr. Tremaine has served on the Board since 2020 and has significant experience in mergers and acquisitions, having served as a managing director at a national investment bank prior to retirement.
The Company will further disclose the following information regarding the directors who were not appointed to the Special Committee:
•  Marcus Ellender — CEO and Co-Founder of the Company and a member of the Board of Directors. Mr. Ellender was excluded from the Special Committee due to his position as the Company's Chief Executive Officer and his indirect economic interest in the Company through the Ellender Family Trust, which holds approximately 1,155,789 shares of CRFH common stock (representing approximately 18.3% of the total shares outstanding). The Board determined that Mr. Ellender's dual role as a member of management and a significant stockholder, together with certain discussions between Mr. Ellender and representatives of Ardent Capital regarding his potential post-closing role with the surviving company, created the appearance of interests that could differ from those of the Company's unaffiliated public stockholders and warranted his exclusion from the Special Committee.
•  Sandra Maldonado — Independent director and Chair of the Audit Committee. Ms. Maldonado was not appointed to the Special Committee in order to maintain a committee of manageable size; however, Ms. Maldonado was not precluded from attending meetings of the full Board at which the proposed Merger was discussed, and she participated in the Board's deliberations regarding the transaction.
Independence Determination.  The Company will revise the disclosure to state that each member of the Special Committee was determined by the Board of Directors to satisfy the following independence criteria:
(a) Each member qualifies as an "independent director" under Nasdaq Listing Rule 5605(a)(2), meaning that the Board has affirmatively determined that such director has no relationship with the Company (directly or as a partner, shareholder, or officer of an entity that has a relationship with the Company) that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.
(b) No member of the Special Committee has any material financial interest in the proposed Merger that differs from the interests of the Company's public stockholders generally. Each member will receive the same $4.75 per share cash Merger Consideration for his or her shares of CRFH common stock (if any) as all other stockholders, and none of the members has any agreement with, or financial interest in, Ardent Capital, Merger Sub, or any of their affiliates.
(c) No member of the Special Committee has any family relationship, employment relationship, consulting arrangement, or other business or personal relationship with Ardent Capital Partners III LP, Ardent Capital GP III LLC, or any of their respective directors, officers, partners, members, or affiliates.
Advisors.  The Company will revise the disclosure to describe the independent advisors retained in connection with the Special Committee's evaluation of the Merger:
•  Financial Advisor: The Special Committee retained Lantern Hill Advisory LLC as its independent financial advisor. The engagement was led by Evan Nakashima, Managing Director. Lantern Hill was engaged to provide financial advisory services to the Special Committee, including the rendering of a fairness opinion with respect to the Merger Consideration.
•  Legal Counsel: The Company was represented by Whitfield, Crane & Sato LLP, led by Catherine Osei, Partner, M&A, as outside legal counsel to the Company in connection with the Merger. Whitfield, Crane & Sato advised the Special Committee and the Board on the legal aspects of the proposed transaction, including the negotiation and drafting of the Merger Agreement and related transaction documents.
Deliberations.  The Company will revise the disclosure to describe the material meetings and deliberations of the Special Committee in connection with the proposed Merger. From formation on February 14, 2022 through execution of the Merger Agreement on April 25, 2022, the Special Committee held 11 formal meetings, each of which included participation by representatives of Lantern Hill and/or Whitfield, Crane & Sato. In addition, the members of the Special Committee engaged in numerous informal discussions and communications among themselves and with advisors throughout the process. The Company will describe the evolution of the transaction as follows:
•  On February 11, 2022, Ardent Capital Partners III LP submitted a non-binding indication of interest to acquire 100% of the outstanding shares of CRFH common stock at a price of $4.25 per share in cash.
•  At its first meeting on February 14, 2022, the Special Committee discussed the IOI with counsel and determined to engage Lantern Hill as its financial advisor, and to instruct Lantern Hill to evaluate the adequacy of the proposed per-share price and to assess the Company's standalone value.
•  Over the ensuing weeks, the Special Committee and its advisors engaged in a series of negotiations with Ardent Capital and its advisors regarding the per-share price and the terms of the proposed Merger Agreement. On March 4, 2022, Ardent Capital revised its indication of interest to $4.40 per share, and on March 18, 2022, further revised its indication to $4.60 per share.
•  On March 28, 2022, following continued negotiations directed by the Special Committee, Ardent Capital submitted a revised binding offer of $4.75 per share in cash, representing a premium of approximately 47.5% to the Unaffected Price and representing a 10.3% increase from Ardent Capital's initial offer of $4.25 per share.
•  The Special Committee deliberated regarding the $4.75 per share offer at meetings held on April 1, 2022, April 8, 2022, and April 15, 2022. During this period, the Special Committee and its advisors continued to negotiate the terms of the Merger Agreement, including the non-solicitation provisions, the Go-Shop Period, the Company Termination Fee, the Reverse Termination Fee, the conditions to closing, and the limited guarantee.
•  On April 22, 2022, Lantern Hill delivered its Fairness Opinion to the Special Committee, opining that, as of such date and based upon and subject to the assumptions, qualifications, and limitations set forth therein, the $4.75 per share cash Merger Consideration was fair, from a financial point of view, to the holders of CRFH common stock (other than Ardent Capital, Merger Sub, and their respective affiliates).
•  On April 25, 2022, the Special Committee held a final meeting at which it unanimously voted to recommend that the full Board approve the Merger Agreement. The full Board (with Mr. Ellender recusing himself from the vote) thereafter unanimously approved the Merger Agreement, and the Merger Agreement was executed by the parties on April 25, 2022.
Factors in Favor of the Merger
The Company will revise the disclosure to describe the material factors considered by the Special Committee in reaching its determination to recommend the Merger to the full Board of Directors, including, among others:
•  The premium of approximately 47.5% over the Unaffected Price of $3.22 per share, which the Special Committee considered to be meaningful and attractive in light of the Company's historical trading prices.
•  The certainty of all-cash consideration of $4.75 per share, providing immediate and certain liquidity to stockholders without exposure to the risks of future Company performance, industry cyclicality, or stock market volatility.
•  The Fairness Opinion of Lantern Hill Advisory LLC, delivered on April 22, 2022, that the $4.75 per share Merger Consideration was fair, from a financial point of view, to the holders of CRFH common stock (other than Ardent Capital, Merger Sub, and their respective affiliates).
•  The results of the Go-Shop Period, during which Lantern Hill contacted 14 potentially interested parties and no Superior Proposal was received, which the Special Committee viewed as confirming the adequacy of the Merger Consideration.
•  The implied valuation multiples, including an EV/EBITDA multiple of approximately 7.5x and an EV/Revenue multiple of approximately 0.99x, which the Special Committee viewed as within or near the ranges observed for comparable companies and precedent transactions.
•  The Company's business outlook and risks, including the ongoing competitive pressures in the boutique hospitality market, rising labor and supply chain costs, the Company's need for capital investment in property renovations and maintenance, and the inherent cyclicality of the travel and hospitality industry, particularly in light of the uncertain macroeconomic environment.
•  The terms of the Merger Agreement, including the customary fiduciary-out provisions that permit the Board to respond to unsolicited Superior Proposals, the 30-day Go-Shop Period, and the reasonable level of the Company Termination Fee.
•  The absence of a financing condition, providing stockholders with greater closing certainty.
Factors Weighing Against the Merger
The Company will also disclose the factors that the Special Committee considered as potentially weighing against the Merger, including, among others:
•  The all-cash nature of the Merger Consideration, which precludes the Company's existing stockholders from participating in any future appreciation in the value of the Company's business or assets following the closing of the Merger.
•  The risks inherent in the hospitality industry and the potential for the Company's financial performance to improve, including the possibility that the Company's properties could benefit from the ongoing recovery in leisure travel demand, which could result in a higher standalone valuation in the future.
•  The tax consequences to stockholders of the receipt of cash Merger Consideration, including the recognition of taxable gain by stockholders who have a tax basis in their shares below $4.75 per share.
•  The restrictions on the Company's ability to solicit alternative acquisition proposals following the expiration of the Go-Shop Period, including the non-solicitation covenant and the Company Termination Fee of $900,000 and its potential deterrent effect on competing bids.
•  The potential conflicts of interest arising from the contingent nature of Lantern Hill's compensation.
•  The risks and costs associated with the Merger itself, including the potential disruption to the Company's business during the pendency of the transaction, the diversion of management attention, and the risk that the Merger might not be consummated.
•  The effects of the announcement and pendency of the Merger on the Company's relationships with its employees, guests, vendors, and business partners.
Recommendation.  The Company will confirm that, after careful consideration of all of the foregoing factors (both favorable and unfavorable), the Special Committee determined that, on balance, the potential benefits of the Merger to the Company's stockholders outweighed the potential detriments. Accordingly, the Special Committee unanimously recommended to the full Board of Directors that the Board approve and adopt the Merger Agreement and recommend that the Company's stockholders vote in favor of the proposal to adopt the Merger Agreement and approve the Merger.
This enhanced disclosure will appear in the sections of the Revised Proxy Statement captioned "Special Factors — Background of the Merger" (beginning on page 18), "Special Factors — Reasons for the Merger; Recommendation of the Special Committee and the Board of Directors" (beginning on page 30), and "Special Factors — Interests of Certain Persons in the Merger" (beginning on page 42).
Comment 5: Stockholder Approval Requirement and Voting
The Staff notes that the Preliminary Proxy Statement describes the stockholder approval required to consummate the Merger. Please revise the disclosure to clarify the specific stockholder approval threshold required, including the voting standard, the record date, and the treatment of abstentions and broker non-votes in the context of the applicable voting standard.
Response:
The Company acknowledges the Staff's comment and will revise the disclosure in the Revised Proxy Statement to provide enhanced clarity regarding the stockholder approval requirement and voting mechanics.
The Company will revise the disclosure to state that, pursuant to Section 251 of the Delaware General Corporation Law (the "DGCL") and the terms of the Merger Agreement, the adoption of the Merger Agreement and the approval of the Merger require the affirmative vote of the holders of a majority of the outstanding shares of CRFH common stock entitled to vote thereon. As of the record date, 6,315,789 shares of CRFH common stock are outstanding and entitled to vote at the Special Meeting. Accordingly, the adoption of the Merger Agreement and the approval of the Merger require the affirmative vote of at least 3,157,895 shares of CRFH common stock, regardless of the number of shares actually present in person or represented by proxy at the Special Meeting.
The Company will disclose that the Board of Directors has fixed June 24, 2022 as the record date (the "Record Date") for the determination of stockholders entitled to notice of and to vote at the Special Meeting of Stockholders (the "Special Meeting"). Only holders of record of shares of CRFH common stock at the close of business on the Record Date will be entitled to vote at the Special Meeting.
The Company will clarify that because the voting standard for adoption of the Merger Agreement is based on a majority of all outstanding shares of CRFH common stock (rather than a majority of shares present or represented at the Special Meeting), abstentions and broker non-votes will have the same practical effect as votes cast "AGAINST" the proposal to adopt the Merger Agreement and approve the Merger. A stockholder who fails to submit a proxy or fails to vote in person at the Special Meeting will also effectively have the same result as a vote "AGAINST" the Merger proposal.
The Company will also disclose the following information regarding significant stockholdings and voting commitments:
•  Ellender Family Trust: The Ellender Family Trust, of which Marcus Ellender (CEO and Co-Founder of the Company) is the trustee and beneficiary, holds 1,155,789 shares of CRFH common stock, representing approximately 18.3% of the total shares outstanding as of the Record Date. The Ellender Family Trust has entered into a Voting and Support Agreement, dated as of April 25, 2022, with Ardent Capital Partners III LP, pursuant to which the Ellender Family Trust has agreed, among other things, to vote all of its shares of CRFH common stock in favor of the proposal to adopt the Merger Agreement and approve the Merger, subject to certain customary exceptions and termination provisions.
•  Tidewater Asset Management LLC: Based on the most recent Schedule 13G filed with the Commission, Tidewater Asset Management LLC holds approximately 612,632 shares of CRFH common stock, representing approximately 9.7% of the total shares outstanding. Tidewater Asset Management LLC is not a party to any voting agreement in connection with the Merger.
•  Broadleaf Institutional Partners LP: Based on the most recent Schedule 13G filed with the Commission, Broadleaf Institutional Partners LP holds approximately 448,421 shares of CRFH common stock, representing approximately 7.1% of the total shares outstanding. Broadleaf Institutional Partners LP is not a party to any voting agreement in connection with the Merger.
The Company will further note that it has engaged Meridian Proxy Services Inc. as proxy solicitor to assist in the solicitation of proxies in connection with the Special Meeting. Meridian Proxy Services will contact stockholders, banks, brokers, and other nominees to assist in the solicitation process.
This enhanced disclosure will appear in the sections of the Revised Proxy Statement captioned "The Special Meeting — Record Date and Voting" (beginning on page 12), "The Special Meeting — Required Vote" (beginning on page 14), "The Special Meeting — Abstentions and Broker Non-Votes" (beginning on page 15), and "Security Ownership of Certain Beneficial Owners and Management" (beginning on page 68).
Comment 6: Sources of Funding and Financing Conditions
The Staff notes that the Preliminary Proxy Statement describes the sources of funds for the Merger. Please revise the disclosure to provide enhanced detail regarding the sources of funds for the payment of the merger consideration, including the terms of any debt financing commitment and any conditions to funding. In addition, please describe the consequences to the Company and its stockholders in the event the financing is not obtained.
Response:
The Company acknowledges the Staff's comment and will revise the disclosure in the Revised Proxy Statement to provide enhanced detail regarding the sources and uses of funds for the Merger and the consequences of a potential financing failure.
The Company will revise the disclosure to describe the sources and uses of funds as follows:
Sources of Funds
Uses of Funds
Debt Financing Terms
The Company will revise the disclosure to describe the terms of the senior secured term loan facility as follows:
•  Lender: Pinnacle Commercial Lending Corp.
•  Commitment Letter: Dated April 8, 2022 (Reference No. PCL-2022-SF-0417).
•  Facility Amount: $10,000,000 senior secured term loan facility.
•  Interest Rate: Secured Overnight Financing Rate ("SOFR") plus 425 basis points per annum.
•  Maturity: Five years from the closing date of the Merger.
•  Original Issue discount: 1.0%.
•  Security: First-priority lien on substantially all assets of Coral Reef Hospitality Group, Inc. (as the surviving entity in the Merger) and its subsidiaries following the closing of the Merger.
•  Conditions to Funding: The funding of the term loan facility is subject to customary conditions, including (i) the execution and delivery of definitive credit documentation, (ii) the accuracy of representations and warranties in all material respects, (iii) the absence of a material adverse effect on the Company, (iv) the consummation of the Merger substantially simultaneously with the funding, and (v) the delivery of customary closing documents, officer's certificates, and legal opinions.
Absence of Financing Condition
The Company will prominently disclose that the obligation of Ardent Capital Partners III LP and Merger Sub to consummate the Merger is not subject to a financing condition. Specifically, Ardent Capital's obligation to close the Merger pursuant to the Merger Agreement is not conditioned upon the receipt of the debt financing described above or any other financing. Accordingly, even in the event that the debt financing from Pinnacle Commercial Lending Corp. is not available at the closing of the Merger, Ardent Capital remains obligated under the Merger Agreement to consummate the Merger and pay the Merger Consideration, subject to the satisfaction or waiver of the other conditions to closing set forth in the Merger Agreement.
Limited Guarantee and Reverse Termination Fee
The Company will revise the disclosure to describe the limited guarantee and the Reverse Termination Fee as follows:
•  Limited Guarantee: In connection with the execution of the Merger Agreement, Ardent Capital GP III LLC (the general partner of Ardent Capital Partners III LP) has delivered a limited guarantee (the "Limited Guarantee") to the Company, guaranteeing Ardent Capital's payment obligations under the Merger Agreement up to a maximum aggregate amount equal to the Reverse Termination Fee of $1,200,000. The maximum aggregate liability of Ardent Capital GP III LLC under the Limited Guarantee is capped at $1,200,000 and does not extend to any other obligations of Ardent Capital under the Merger Agreement. The Limited Guarantee is the sole recourse of the Company against Ardent Capital GP III LLC in the event of a breach by Ardent Capital of its obligations under the Merger Agreement.
•  Reverse Termination Fee: Pursuant to Article VII of the Merger Agreement, if the Merger Agreement is terminated under certain specified circumstances — including, without limitation, (a) a termination by the Company if Ardent Capital or Merger Sub has breached or failed to perform any of its representations, warranties, covenants, or agreements under the Merger Agreement and such breach is not cured within 20 business days following written notice thereof (or is incapable of being cured), and such breach would result in a failure of the conditions to the Company's obligation to close, or (b) a termination by the Company or Ardent Capital if the Merger has not been consummated by the Outside Date and the failure to consummate the Merger by such date was caused by a failure of Ardent Capital or Merger Sub to fulfill their obligations under the Merger Agreement (including a failure to obtain financing) — then Ardent Capital is obligated to pay to the Company a Reverse Termination Fee of $1,200,000 in cash (the "Reverse Termination Fee"), representing approximately 4.0% of the aggregate equity value of $30,000,000. The payment of the Reverse Termination Fee constitutes the sole and exclusive remedy of the Company and its stockholders against Ardent Capital, Merger Sub, and Ardent Capital GP III LLC for any loss or damage suffered as a result of such termination circumstances, subject to limited exceptions for fraud or willful and material breach.
Consequences of Financing Failure
The Company will disclose that, in the event the debt financing from Pinnacle Commercial Lending Corp. is not available at the time of closing, Ardent Capital would be required to fund the full Merger Consideration and estimated transaction expenses from its equity commitment and any alternative financing it may arrange. If Ardent Capital fails to consummate the Merger for any reason, including a financing failure, the Company's sole monetary remedy would be the receipt of the Reverse Termination Fee of $1,200,000, and the Company's stockholders would not receive the $4.75 per share Merger Consideration. The Company will note that, while the absence of a financing condition is intended to provide the Company and its stockholders with enhanced closing certainty, there can be no assurance that Ardent Capital will have sufficient funds to consummate the Merger if the debt financing is not obtained, and the Company's recourse in such circumstance is limited to the Reverse Termination Fee as guaranteed under the Limited Guarantee.
This enhanced disclosure will appear in the sections of the Revised Proxy Statement captioned "Special Factors — Sources of Funds for the Merger" (beginning on page 45), "The Merger Agreement — Financing; Financing Cooperation" (beginning on page 58), "The Merger Agreement — Termination; Termination Fees" (beginning on page 62), and "The Merger Agreement — Limited Guarantee" (beginning on page 65).
The Company believes the foregoing responses fully address each of the Staff's comments set forth in the Comment Letter dated June 3, 2022. The Company intends to file the Revised Proxy Statement on Schedule 14A, incorporating the revisions described herein, with the Commission on or about June 17, 2022. Following the Staff's review and clearance of the Revised Proxy Statement, the Company will seek to file a definitive proxy statement on Schedule 14A and will commence distribution of the definitive proxy materials to stockholders of record as of the Record Date.
Should the Staff have any additional questions or comments regarding the foregoing responses or the Preliminary Proxy Statement, we respectfully request that the Staff contact the undersigned or the Company's outside counsel at the following addresses:
Patricia Sung Chief Financial Officer Coral Reef Hospitality Group, Inc. 2400 Bayshore Boulevard, Suite 300 Tampa, FL 33629 Telephone: (813) 555-2400
Email: psung@coralreefhospitality.com
Catherine Osei Partner, Mergers & Acquisitions Whitfield, Crane & Sato LLP One Southeast Financial Center, Suite 4200 Miami, FL 33131 Telephone: (305) 555-6800
Email: cosei@whitfieldcrane.com
Harrison Wexford Partner, Corporate Calderwood & Harkness LLP 1301 Avenue of the Americas, 40th Floor New York, NY 10019 Telephone: (212) 555-4100
Email: hwexford@calderwoodharkness.com
In connection with this response, the Company acknowledges the following:
•  The Company is responsible for the accuracy and adequacy of the disclosures contained in its filings with the Commission.
•  Comments of the Staff, or changes made to the Company's disclosure in response to Staff comments, do not foreclose the Commission from taking any action with respect to the filing.
•  The Company may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.
Respectfully submitted,
CORAL REEF HOSPITALITY GROUP, INC.
By: ________
Name: Patricia Sung
Title: Chief Financial Officer
Date: June 14, 2022
This letter has been prepared by Calderwood & Harkness LLP, in coordination with Whitfield, Crane & Sato LLP, on behalf of Coral Reef Hospitality Group, Inc., and is submitted by Patricia Sung, Chief Financial Officer, on behalf of the registrant.
cc:
Reginald Ashworth, Board Chair & Special Committee Chair, Coral Reef Hospitality Group, Inc. Marcus Ellender, CEO, Coral Reef Hospitality Group, Inc. Catherine Osei, Partner, Whitfield, Crane & Sato LLP Robert Whitfield III, Partner, Whitfield, Crane & Sato LLP Harrison Wexford, Partner, Calderwood & Harkness LLP Beatrice Holloway, Counsel, Calderwood & Harkness LLP Megan Chu, Associate, Calderwood & Harkness LLP
Source | Amount
Ardent Capital Partners III LP — Equity Contribution | $22,500,000
Pinnacle Commercial Lending Corp. — Senior Secured Term Loan | $10,000,000
Total Sources | $32,500,000
Use | Amount
Payment of Merger Consideration to CRFH Stockholders ($4.75 × 6,315,789 shares) | $30,000,000
Estimated Transaction Expenses (advisory fees, legal fees, filing fees, proxy solicitation fees, and other closing costs) | $2,500,000
Total Uses | $32,500,000

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CORAL REEF HOSPITALITY GROUP, INC.

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