NEW YORK — NEW YORK -- Marriott Corp.'s troubled plan to split into two companies hit more resistance yesterday as a group of stockholders banded to fight the plan.
The latest group of opponents, made up of six owners of preferred stock, includes Harvard College, Union Bank of Switzerland and UBS Securities Inc. In a filing yesterday with the Securities and Exchange Commission, they said they organized to fight Marriott's "coercive" and "detrimental" reorganization, which they said would leave them without a dividend and with devalued stock.
The filing does not ask the SEC to take specific action but is instead a formal notification that the shareholders have organized. The shareholders say they want Marriott to drop the reorganization, amend it to their satisfaction or pay them damages.
Marriott officials declined to comment, but spokesman Nick Hill said the reorganization "is going ahead as scheduled."
The plan, announced in October, would split the Bethesda-based hotel chain into two companies. One company, be called Host Marriott Corp., would take over the company's debt-laden real estate operations. The other company, debt-free Marriott International Inc., would run the profitable hotel management and services group.
The holders of preferred stock oppose the split because it would transfer their stock to Host Marriott, which they fear would be too weak to make dividend payments.
The stockholders' attack is the third serious problem in a week to confront Marriott, which only last month seemed to have allayed criticism of its reorganization after settling with a group of bondholders.
Like the preferred stockholders, the bondholders had been concerned that Host Marriott would be too weak to be viable. They feared that it would be unable to meet bond payments if separated from the profitable hotel management businesses.
Under the settlement reached March 11, Marriott agreed to transfer $450 million in debt from Host Marriott to Marriott International. The company said this would help even out the debt between the two proposed companies.
Initially, the settlement seemed to allay worries, but since then new groups have formed to oppose the plan.
One group of bondholders, for example, said the settlement still left Host Marriott weak. They asked a judge to allow them to break away from the satisfied bondholders and continue their suit.
On Tuesday, the judge agreed, ruling that they could proceed with their lawsuit even if other bondholders were satisfied with the settlement. The judge promised a thorough investigation of Marriott's plan, said Steve Cooper, a lawyer representing the principal bondholder, PPM America Inc.
And last week, the Florida State Board of Administration, which administers $33 billion in state employee assets, filed suit in Baltimore to prevent the reorganization from going ahead. The Florida group, which owns $7 million of Marriott's $1.9 billion in bonds, contends that Marriott is setting a bad precedent that other companies will follow when they want to shed debt.
Marriott's plan has also caused the SEC to tighten disclosure laws to make it harder for companies like Marriott to sell bonds and then transfer the debt to another operation. Marriott sold bonds last spring, a few months before announcing the reorganization.
"It ain't over until the fat lady sings," Mr. Cooper said. "This fight is by no means over."