MeriStar Revises First-Quarter, Full-Year Guidance

ARLINGTON, VA— MeriStar Hospitality Corp. reported it has completed a number of capital markets transactions that will “significantly improve the company’s capital structure, produce considerable savings in interest expense and enhance the company’s credit statistics.” As a result, the hotel REIT has revised its first-quarter and full-year 2004 earnings guidance to reflect these changes as well as to adjust for the effect of its pending acquisition of the Ritz Carlton, Pentagon City. The company also claimed that, based on preliminary results, first-quarter 2004 revenue per available room (RevPAR) for its 73 core hotels is projected to increase approximately 2.7% over the 2003 first quarter. As such, it was suggested a RevPAR increase of this magnitude would exceed the company’s previously expected range of flat – 2.0%. “We are very pleased with the year-over-year RevPAR improvement in the first quarter, which was driven mainly by a projected 6.0% increase in March,” said MeriStar Chairman/CEO Paul Whetsell. “Operating results from our core hotels were stronger than expected, [although]these strong results were somewhat offset by weaker-than-expected operating performance from our hotels for sale,” he said. However, Whetsell pointed out: “The disposition of these properties is nearly complete, and we do not expect the remaining disposition assets to have a significant impact on our results going forward.” The company added that its recent capital markets activities include: • purchasing an additional $39 million of senior notes, bringing the year-to-date 2004 total purchased to $74 million and reducing the combined balance outstanding on the notes to $876 million face amount; • entering into an interest-rate swap on its $307-million CMBS loan due 2009, converting the facility from a fixed rate to a floating rate [of]LIBOR plus 444 basis points, or 5.54% currently compared to the fixed rate of 8.01%; and • retiring an additional $25 million of its 8% senior subordinated notes due 2007. (Year-to-date 2004, the company has retired $38 million of senior subordinated notes— plus $0.8 million of accrued interest— through the issuance of 6.3 million shares of common stock. In addition, the company has two exchange transactions pending New York Stock Exchange approval to retire $11 million of senior subordinated notes plus accrued interest of $0.2 million through the issuance of 1.8 million shares of common stock.) The company similarly plans to call the remaining $34 million balance of the senior subordinated notes by the end of the third quarter. According to MeriStar CFO Donald Olinger, these transactions will result in interest-rate savings of approximately $10 million in 2004, or $16 million annualized. “We continue to make significant progress in improving our capital structure,” Olinger noted. “These transactions will greatly improve our credit statistics and further enhance our financial flexibility.” Based on preliminary first-quarter operating results, the projected savings in interest expense from the completed and pending capital markets transactions, and the pending acquisition of the Ritz Carlton in Pentagon City, the company has revised its first-quarter and full-year 2004 earnings guidance as follows: • RevPAR increase of 3.5% – 4.5% for the full year; • net loss (a) of $(28) million – $(30) million for the first quarter and $(68) million – $(76) million for the full year; • net loss per diluted share of $(0.40) – $(0.43) for the first quarter and $(0.93) – $(1.03) for the full year; • FFO per diluted share (a) of $(0.07) – $(0.10) for the first quarter and $0.21 – $0.31 for the full year; • adjusted FFO per diluted share (a) of $0.00 – $0.03 for the first quarter and $0.34 – $0.44 for the full year; and • adjusted EBITDA (a) of $36 million – $38 million for the first quarter and $155 million – $163 million for the full year.