WASHINGTON -- Marriott Corp. removed an obstacle to its proposed split into two companies by altering the terms of an exchange offer for $1.525 billion in debt.
The nation's biggest hotel company said it made the change so it can proceed without the participation of investors in two note issues. "We have met the conditions under the amended offer," said Robert Souers, a spokesman.
The decision could require Bethesda-based Marriott to spend more than $140 million to refinance debt that could be left out of the offer, part of a settlement with bondholders who threatened a court battle over its restructuring plan.
The company's restructuring proposal calls for the company to split into Marriott International Inc., a profitable hotel-management company, and Host Marriott Corp., a money-losing company with a real estate business and airport and toll-road concessions.
The exchange offer calls for bondholders to swap their securities for new bonds with interest rates one percentage point higher than Marriott's current debt. The new issues would come due four years later.
Marriott has received tenders from holders of $1.2 billion of the 10 series of bonds included in the offer. Excluding the two note issues, 88 percent of the debt has been tendered.
The company waived a condition in the original offer that at least 51 percent of each of the 10 series had to be tendered, which held up completion of the exchange. It extended its offer by one week, to Friday, to give holders of the two series of notes extra time to consider the proposal.
Investors have tendered 46 percent of Marriott's 9 1/8 percent Series F note issue due 1995. If the offer doesn't attract 51 percent of the notes, Marriott said it would redeem those that aren't tendered at par plus accrued interest. Marriott would have to come up with $54 million to redeem all the Series F notes that aren't yet tendered.
Holders of the company's 9 percent series I bonds due in 1995 have tendered 13 percent of their bonds. That would leave Marriott with the obligation to pay for about $87 million of bonds in two years.
Under the original exchange, the company had hoped to extend the maturity of both note issues until 1999.
Money aside under the original exchange offer could be used to pay for redemption of the notes, the company said.
In addition to the new bonds, Marriott had offered bondholders as much as $70 million of its stock and up to $104 million in cash under the offer.