Marriott tries to mollify bondholders

October 23, 1992|By Bloomberg Business News

BOCA RATON, Fla. -- Marriott Corp., facing bondholder outrage about its planned restructuring, provided investors yesterday with more details about its prospects.

Stephen Bollenbach, Marriott's chief financial officer, told junk bond investors at a conference sponsored by the securities firm Donaldson, Lufkin & Jenrette that they have nothing to worry about.

"We intend to live up to obligations, including payment of interest and principal when due," Mr. Bollenbach said. Marriott ought to be able to meet those obligations "by a comfortable margin," he said.

The hotel chain said this month that it would split in two, leaving Marriott International Inc. with a pristine balance sheet and Host Marriott Corp. saddled with all of Marriott's real estate and $2.9 billion debt, including $500 million worth of mortgages.

The announcement turned Marriott's corporate bonds into high-risk, high-yield junk bonds, slashed the bonds' value as much as 30 percent and triggered several lawsuits.

Some big investment institutions, including IDS Financial Services, Fidelity Management & Research and Wellington Management Co., already have discussed banding together to block the reorganization. Analysts say such a joint effort also might attempt to scuttle the restructuring in court.

Yesterday, Marriott officials acknowledged that Thomas Piper, a member of Marriott's board for 10 years, resigned last month to protest the restructuring plan.

Prices of Marriott's bonds were unchanged yesterday. The company's 10 percent bonds due in 2012 were trading at $845 per $1,000 bond. Last month, they traded as high as $1,100. Its 9 1/2 percent bonds due in 2002 are trading at $850, down from $1,050 last month.

Marriott's stock has risen almost 15 percent since the restructuring was announced. Traded on the New York Stock Exchange, the shares closed unchanged yesterday at $19.625.

Mr. Bollenbach, former chief financial officer for a company controlled by failed real estate operator Donald Trump, will become Host Marriott's president and chief executive. He told investors that the Marriott family has an interest in ensuring Host Marriott doesn't go bust: The Marriotts will own 25 percent of the company, and Richard Marriott will be chairman.

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