Marriott bondholders get OK to fight company restructuring

February 12, 1993|By David Conn | David Conn,Staff Writer

A federal judge gave bondholders of Marriott Corp. the right yesterday to pursue their lawsuit aimed at blocking the Bethesda-based hospitality company's restructuring plan, and

scheduled a hearing in two months on Marriott's motion to dismiss the case.

The hearing before U.S. District Judge Alexander Harvey was the first time both sides in the case appeared in court since they agreed in December to talk over Marriott's controversial plan to split itself into two companies. The plan, critics said, would benefit stockholders at the expense of bondholders.

Some of the lawyers involved in the case indicated that negotiations continue between the two sides. But the hearing made clear that the issues the case has raised -- about a corporation's duties to its stockholders vs. its bondholders -- likely will have to be resolved in court.

Under a timetable established yesterday, the bondholders have until March 12 to respond to Marriott's motion to dismiss the case, which was filed Wednesday. Marriott then will have until April 1 to respond to the response, and a hearing will be held on the motion on April 8.

The restructuring plan, scheduled to be completed no sooner than June 4, would leave the newly created Marriott International Inc. with the company's profitable hotels, food operations and retirement communities, and very little debt. Host Marriott Corp. would end up with the company's depressed real estate holdings, its airport and toll road concessions, and most of the $2.9 billion in debt, including about $1.9 billion in bonds.

Various bondholders, including some of the nation's biggest institutional investors, sued Marriott to block or alter the plan. They alleged, among other things, the Marriott Host company would not be able to meet its debt obligations.

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