Holloway to issue trust units in full redemption of 6.5% convertibles

By Jennifer Chiou

New York, Dec. 22 - Holloway Lodging Real Estate Investment Trust announced that it will redeem all of its 6.5% convertible debentures on Jan. 23 and will settle the redemption price by issuing trust units in lieu of cash.

The trust will not make the interest payment when it is due on Dec. 31 and will instead make the payment on Jan. 13. Accrued interest will be paid in cash, according to a news release.

In November, the lodging-focused REIT reported that it did not have enough cash resources to repay the C$48.2 million of then-outstanding debentures when they mature on June 30, 2012. It did not expect to be in a position to repay or refinance all of them at maturity.

The release stated that Holloway management and the board of trustees have pursued multiple alternatives to reduce overall indebtedness, including selling two hotels, repaying the REIT's 8% convertible unsecured subordinated debentures, which matured on Aug. 1 using the proceeds of a high-yield secured credit facility and repurchasing roughly C$5.5 million of the 6.5% debentures and other debt at substantial discounts.

The number of units to be issued will be determined by dividing the outstanding principal amount of debentures by 95% of the weighted average trading price per unit for the 20 consecutive trading days ending on the fifth trading day preceding the redemption date.

Using the Jan. 23 redemption date, the 20-trading day period started on Dec. 15 and will end on Jan. 16 inclusive.

The units issue is subject to all necessary regulatory approvals.

In addition, Holloway announced that it has entered into a second amendment to its credit agreement with Geosam Capital Inc. as administrative agent to increase the amount of funds available for drawdown by C$3.6 million for certain limited purposes.

Holloway said that it has increased the amount outstanding under the credit agreement by C$1.8 million in order to purchase about C$2.8 million of interest-bearing promissory notes from holders.

Holloway is based in Halifax, N.S.

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