Patriot American selling 30% stake for $1 billion Cash from ++ financiers to help manage debt

Real estate

December 17, 1998|By Kevin L. McQuaid | Kevin L. McQuaid,SUN STAFF Bloomberg News contributed to this article.

Patriot American Hospitality Inc. said yesterday that it would sell a 30 percent stake for $1 billion to an investor group led by financiers Leon Black and Thomas Lee, giving it cash to help repay $1.7 billion of debt coming due.

The Dallas-based real estate investment trust said the Black and Lee group will purchase convertible preferred stock and be entitled to six of 15 seats on the company's board.

"This certainly clarifies a lot of questions about their liquidity," said Brad Cohen, an analyst at Sands Brothers.

The investment may also help Patriot American, owner of the Wyndham Hotel chain, fund the acquisition of the $134 million Wyndham Inner Harbor East Hotel being developed by H&S Bakery Inc. co-owner John Paterakis Sr. and a pair of Atlanta companies. The 750-room hotel recently began construction and scheduled for completion in late 2000.

"The investment will enable Patriot to reduce leverage, improve liquidity and allow the company to implement its business plan," said Patriot American Chairman and Chief Executive Officer Paul A. Nussbaum.

The investment comes a few weeks after the company said fourth-quarter earnings would be lower than expected and its decision not to pay a dividend for the third quarter.

In all, the company has $3.9 billion of debt and $6.6 billion of hotel assets. It owns, manages or franchises 486 hotels.

Black is making the investment through his Apollo Real Estate Advisers L. P. Lee's Thomas H. Lee Co. is a buyout firm best known for its investment in Snapple Beverage Corp.

Other members of the investor group include Beacon Capital Partners Inc. and Rosen Consulting Group.

"The first and most important step in re-establishing a sound financial foundation for Patriot American is substantially increasing the company's equity capitalization," said William Mack, who manages Apollo's real estate investments for Black.

The investment is contingent on the execution of a definitive JTC agreement, successful restructuring of some debt and shareholder approval. Patriot shares rose 75 cents, to $7.9375, on trading of 3.23 million shares. Before yesterday, the shares had tumbled 75 percent this year.

Pub Date: 12/17/98

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