Sunstone Hotel to begin tender offer, consent solicitation for 4.6% exchangeables Friday

By Angela McDaniels

Tacoma, Wash., April 16 - Sunstone Hotel Partnership, LLC expects to begin a tender offer and consent solicitation for its $186.01 million of outstanding 4.6% exchangeable senior notes due 2027 on April 17, according to a Thursday news release.

The company is offering $600 per $1,000 principal amount of the notes, which includes a consent fee of $5. Holders will also receive accrued interest up to but excluding the payment date.

Noteholders may deliver consents without tendering their notes, in which case they will receive only the $5 consent fee for every $1,000 principal amount of notes.

Noteholders who tender, however, must deliver consents.

The tender offer and consent solicitation will expire at midnight ET on May 14.

The proposed amendment to the indenture governing the notes would amend the events of defaults section so that an acceleration of debt of any subsidiary of Sunstone or parent company Sunstone Hotel Investors, Inc. other than a subsidiary guarantor will not constitute an event of default under the exchangeables.

Under the current terms of the indenture, an acceleration of debt of any subsidiary in excess of $25 million may lead to an event of default under the exchangeables if that debt is not discharged, or the acceleration rescinded, within a 30-day cure period.

Sunstone believes the proposed amendment would be beneficial to the noteholders because it would improve Sunstone's ability to cure any subsidiary loan defaults by negotiating interest deferrals or, if the collateral supporting a non-performing subsidiary loan is impaired to a value below the principal value of the loan, to negotiate a transfer of the collateral to the subsidiary lender in satisfaction of the debt.

In the company's view, either of these measures would be beneficial to the noteholders as compared to deploying cash to either subsidize or prepay non-performing loans.

The amendment and the payment of the consents-only consideration will be conditioned on the receipt of consents from holders of at least a majority of the notes.

The tender offer will not be conditioned on the receipt of the needed consents, and neither of the tender offer or the consent solicitation will be conditioned on the receipt of financing or on any minimum principal amount of notes being tendered.

Citi (800 558-3745) will be the dealer manager and solicitation agent, and Global Bondholder Services Corp. (212 430-3774 for banks and brokers or 866 857-2200) will be the information agent.

Sunstone is the operating partnership of Sunstone Hotel Investors, a lodging real estate investment trust based in San Clemente, Calif.

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