Host Marriott in talks with lenders about new credit facility

By Sara Rosenberg

New York, May 7 - Host Marriott Corp. is currently in negotiations with lenders regarding a new long-term credit facility, according to a filing with the Securities and Exchange Commission. The new facility is anticipated to be slightly smaller in size than the current loan and have less restrictive covenants, the SEC filing said.

The Bethesda, Md. real estate investment trust that owns full-service hotel properties anticipates amending or replacing its current facility by Aug. 15 since that is when the most recent amendment setting less stringent maximum leverage ratios expires. According to the SEC filing, after the maximum leverage ratios return to the levels that were in effect before the amendment, the company may not be in compliance with the covenant.

The current loan was first established in 1998 with a size of $1.25 billion and a three-year maturity. In May 2000 the loan was reduced to a size of $775 million. In November 2001, the facility was amended for a second time, reducing the available borrowing capacity to $50 million during the first quarter of 2002 and $25 million during the second quarter of 2002. In addition, certain financial covenants were modified in response to the Sept. 11 attacks and the economic recession. At Dec. 31, 2001, the interest rate on the loan was Libor plus 225 basis points; however, it can fluctuate based on the company's leverage ratio, according to the SEC filing. At March 22, 2002, the company had no outstanding balances under its existing facility.

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