Meristar (NYSE:MHX)
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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. All subsequent
written and oral forward-looking statements 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.