WHITE PLAINS, NY— Starwood Hotels & Resorts Worldwide Inc. indicated it paid $202 million in cash to buy back all of its series A zero-coupon convertible senior bonds maturing in 2021, according to a Reuters report The company said it paid 82.735 cents on the dollar for the bonds, which it issued on May 25, 2001. The company said it received about $200 million in gross proceeds from the original sale. According to the report, Starwood is one of many companies forced this year to buy back or sweeten the terms of convertible bonds, which are stock-bond hybrids, sold in 2000 and 2001 to take advantage of low financing costs. Many issuers, including Starwood, sold convertibles with short “put” options. These allowed holders to sell the bonds back early, often in one or two years. Issuers hoped their shares would rise enough so that bondholders would never want to exercise those options. Instead, weak stock prices made exercising the options, rather than waiting for the shares to rise, worthwhile, said Reuters Starwood shares traded Tuesday morning on the New York Stock Exchange at $34.28, down 4 cents. They have fallen 12% in the last year, from $38.94, said the report. Source: Reuters
