UPDATE 3-Orient-Express Q1 bleak; to issue stock, shares sink

* Says Madrid hotel breaches covenant

* Gets waiver on long-term debt facilities

* Sees Q1 rev $89.4 mln vs est $97.4 mln

* Expects loss of $14.6 mln for Q1

* Shares fall 23 pct (Adds analysts' comments, updates share movement)

By Amitha Rajan

BANGALORE, April 27 (Reuters) - As it strives to stay afloat, Orient-Express Hotels Ltd (OEH.N) is looking at options such as stock offerings and disposing assets in an effort to shore up cash.

Orient-Express Hotels on Monday forecast a 26 percent fall in first-quarter revenue per available room, and said one of its hotels breached a debt covenant and that it plans to offer about 15 million of its common stock.

Shares of the company plunged 23 percent to $6.83, before recouping some losses to trade down $1.88 at $6.99 Monday afternoon. The stock was the top percentage loser on the New York Stock Exchange.

The company, which had warned last month that it may breach a minimum $600 million tangible net worth covenant in two long-term debt facilities at the end of its first quarter, also said it obtained a waiver, under which it will need to pay about $9.7 million in June.

"We continue to be concerned about the company's liquidity situation and are concerned that asset sales in this environment could only come at trough multiples," analyst Steven Kent of Goldman Sachs said in a note to clients.

The operator of luxury hotels, restaurants, tourist trains and river cruise businesses said its hotel Ritz Madrid was out of compliance with a debt service coverage ratio in its first mortgage loan facility and is in talks with lenders.

Orient-Express, which planned to suspend quarterly dividend beginning this year, said it had total net debt of about $848.5 million and cash balances of $54.8 million as of March 31.

Standard & Poor's Equity Research downgraded the stock to "sell" from "hold" and trimmed its target price by $1 to $4.50, saying the company has limited options to reduce financial distress.

RAISING CAPITAL

Hotels are struggling as recession-hit consumers cut back on extras like travel at the same time businesses are looking to trim travel costs and avoid perceptions of frivolous spending.

Orient-Express' stock has been hammered in the past 12 months, with the shares shedding about 86 percent of their value from their 52-week high.

The company said it plans to sell about 15 million shares, which represent about 30 percent of its class A shares, and expects to use the proceeds to repay debt. It plans to grant underwriters the option to buy up to 2.25 million shares to cover any over-allotments.

"Consistent with other recent offerings, we believe the liquidity relief outweighs the dilution," said analyst David Katz of Oppenheimer & Co, adding that the offering reduces the company's debt to EBIDTA ratio to a more favorable level.

The company also said it had begun disposing non-core assets and signed a non-binding memorandum of understanding and received a refundable deposit from a prospective buyer for one of its European hotels. One North American hotel is being actively listed for sale as well, it added.

"We believe the present environment for property sales warrants a 'show me' approach. As such, we are not reflecting any property sales in our forecast as of yet," said Katz, who has a "perform" rating on the stock.

OUTLOOK DISAPPOINTS

During the first quarter, the company expects revenue per available room (RevPAR), a key metric for the lodging industry, to fall about 26 percent in terms of U.S. dollars.

The company also forecast a first-quarter net loss of about $14.6 million, more than triple its year-ago loss of $4.3 million. It expects revenue for the period to fall 22 percent.

It expects first-quarter Earnings Before Interest, Taxes, Depreciation and Amortization of $1.3 million and said it expects EBITDA to be reduced by $7 million due to non-cash impairment charges and by $1.2 million due to non-recurring items.

William Truelove, an analyst at UBS, said he expects the company to further lower its outlook when it reports results next month.

"We believe the primary problem is margins, which is typical of luxury hotels attempting to maintain service levels in a downturn," said Truelove, who has a "neutral" rating and a price target of $4.50 on the stock. (Editing by Jarshad Kakkrakandy)