MeriStar Hospitality Corporation Refinances $300 Million CMBS Portfolio Loan; Reduces Interest Rate by More Than 300 Basis Point
15 September 2005 - 2:00PM
Business Wire
MeriStar Hospitality Corporation (NYSE: MHX), one of the nation's
largest hotel real estate investment trusts (REIT), today announced
that it had completed the previously announced refinancing of its
19-property, $300 million CMBS loan. The refinancing lowers the
company's rate of borrowing by more than 300 basis points, provides
greater flexibility for property dispositions and substitutions,
releases approximately $45 million of cash currently held in escrow
and frees up future property cash flow for general use. "This
transaction is another important step, which, when combined with
the strength of our properties' performance, will continue our
efforts to provide value to our shareholders by strengthening our
balance sheet and improving our overall credit statistics," said
Donald D. Olinger, chief financial officer. "Significantly, it
reduces our expected annualized interest expense by more than $9
million." The refinancing included a defeasance of the existing
loan and borrowings under two new facilities, using 18 properties
that were included in the original collateral package. The new
borrowings consist of a $312 million, 17-property CMBS loan at a
rate of LIBOR plus 135 basis points, or 309 basis points below the
effective rate of the original loan; and a $15 million term loan
covering one property with a borrowing rate of LIBOR plus 350 basis
points. The new CMBS facility will have an initial maturity of
October 9, 2007 plus three one-year extensions at the company's
option. The term loan facility will initially mature on April 9,
2006 with an option to extend the maturity for an additional six
months. Olinger said that the transaction also provides the company
with significantly greater flexibility and control over the 18
hotels in the loan collateral pool, noting that, "We now have the
flexibility to sell assets included in the collateral group that do
not fit with our long-term strategy, generating proceeds to further
reduce our debt while at the same time reducing our future capital
requirements." In the third quarter, the company expects to record
a $45.9 million loss on early extinguishment of debt related to the
defeasance cost and an $8.7 million charge related to the
termination of the interest rate swap on the original CMBS loan. In
addition, the company also expects to record a non-cash impairment
charge of approximately $36 million related to four assets in the
collateral package that the company expects to sell, but which
could not be sold under the original CMBS structure. Despite the
one-time debt related charges, the company expects the transaction
to be net present value (NPV) positive. The CMBS refinancing is one
of a number of financial transactions completed by the company in
2005. In addition to the CMBS refinancing, the company expanded its
bank facility to $150 million while lowering the borrowing rate on
the facility by 100 basis points. Since the end of the first
quarter the company has bought back more than $37 million of its
senior unsecured notes and redeemed the remaining $32.7 million of
8 3/4 percent senior subordinated notes at par on August 15, 2005.
The company also recently announced its intention to expand its
asset disposition activity for the year in response to strong
market conditions for dispositions and expressed interest. "Pending
the sale of additional hotels, we plan to call between $175 million
and $200 million of our 10.5% senior notes when they become
callable on December 15th of this year, significantly reducing our
most costly piece of debt," Olinger said. "We are continuing to see
the positive financial results of our overall corporate strategy.
We expect our weighted average interest rate to decrease by nearly
70 basis points to 7.8% and our interest coverage ratio to improve
from 1.4 to between 1.7 and 1.8 by year end 2005. Our next material
maturity is not until 2008. The performance of our properties
combined with our capital markets activities are strengthening our
balance sheet and improving our overall credit statistics.
Shareholder value has been increased by all of these achievements."
The new CMBS financing and expanded bank facility were placed
through Lehman Brothers. Arlington, Va.-based MeriStar Hospitality
Corporation owns 71 principally upscale, full-service hotels in
major markets and resort locations with 19,889 rooms in 22 states
and the District of Columbia. The company owns hotels under such
internationally known brands as Hilton, Sheraton, Marriott,
Ritz-Carlton, Westin, Doubletree and Radisson. For more information
about MeriStar Hospitality, visit the company's website:
www.meristar.com. This press release contains forward-looking
statements within the meaning of Section 27A of the Securities Act
of 1933 and Section 21E of the Securities Exchange Act of 1934.
Forward-looking statements, which are based on various assumptions
and describe our future plans, strategies and expectations, are
generally identified by our use of words such as "intend," "plan,"
"may," "should," "will," "project," "estimate," "anticipate,"
"believe," "expect," "continue," "potential," "opportunity," and
similar expressions, whether in the negative or affirmative. We
cannot guarantee that we actually will achieve these plans,
intentions or expectations. All statements regarding our expected
financial position, business and financing plans are
forward-looking statements. Except for historical information,
matters discussed in this press release are subject to known and
unknown risks, uncertainties and other factors which may cause our
actual results, performance or achievements to be materially
different from future results, performance or achievements
expressed or implied by such forward-looking statements. Factors
which could have a material adverse effect on our operations and
future prospects include, but are not limited to: economic
conditions generally and the real estate market specifically;
supply and demand for hotel rooms in our current and proposed
market areas; other factors that may influence the travel industry,
including health, safety and economic factors; competition; cash
flow generally, including the availability of capital generally,
cash available for capital expenditures, and our ability to
refinance debt; the effects of threats of terrorism and increased
security precautions on travel patterns and demand for hotels; the
threatened or actual outbreak of hostilities and international
political instability; governmental actions, including new laws and
regulations and particularly changes to laws governing the taxation
of real estate investment trusts; weather conditions generally and
natural disasters; rising interest rates; and changes in U.S.
generally accepted accounting principles, policies and guidelines
applicable to real estate investment trusts. These risks and
uncertainties should be considered in evaluating any
forward-looking statements contained in this press release or
incorporated by reference herein. All forward-looking statements
speak only as of the date of this press release or, in the case of
any document incorporated by reference, the date of that document.
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attributable to us or any person acting on our behalf are qualified
by the cautionary statements in this section. We undertake no
obligation to update or publicly release any revisions to
forward-looking statements to reflect events, circumstances or
changes in expectations after the date of this press release.
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