Adam’s Mark Reportedly Up For Sale

LOS ANGELES— Reuters reports that hotel companies that have depended on cash flow of service heavy debt loads have been especially hurt by the downturn in travel. Privately owned HBE Corp. recently put its chain of 24 Adams Mark hotels— worth hundreds of millions of dollars— up for sale, according to sources familiar with the situation. An HBE spokesman had no comment on the matter, said Reuters. Lodgian meanwhile is reportedly in similar straits, and said its future could be in doubt if it cannot sort out a tangle of problems with its creditors following the sharp downturn. Standard & Poors to cut Lodgians credit ratings on Thursday, warning that the company might be pushed into default if talks with lenders snag over $200 million in subordinated notes. “It would not surprise me that the weaker companies, companies that are either overextended in their debt structure or undercapitalized in terms of their equity or aggressive in terms of the marketplaces theyre in, would struggle the most in the quick downturn were having now,” said Chase Burritt, national director of Ernst & Youngs hospitality group. Wyndham International meanwhile is also continuing with an aggressive program to sell $1.6 billion in assets, or about 27% of its hotel portfolio based on value, a spokesman said. The program is part of the highly-leveraged companys plans, first announced in 1999, to sell off $2.5 billion in non-strategic assets, said spokesman Andrew Jordan. He added that some deals in the works have been delayed by the Sept. 11 attacks, but that the company intends to push forward without selling at firesale prices. Wyndhams sales push follows the post Sept. 11 collapse of its drawn-out negotiations to sell the company to Britains cash-rich Six Continents, operator of the Holiday Inn and Inter-Continental chains. While highly leveraged companies weigh their options, the biggest hotel owners and operators like Host Marriott Corp., Hilton Hotels Corp. and Starwood Hotels & Resorts Worldwide, are not under immediate pressure to sell properties, Burritt said. He said such companies need not worry yet because they have proportionally large equity in the hotels they own, with debt-to-equity ratios often as balanced as 60-40. He said most owners and operators became more conservative with their debt load after the real estate bust of the early 1990s, when lenders foreclosed on many properties that were financed with much higher rates of borrowed money. “Most hotels now have good debt-to-equity ratios,” Burritt said. “That would suggest that even if they had major impacts, its still several months off before they would use up their equity reserves.” SOURCE: Reuters