SILVER SPRING, MD— Sunburst Hospitality has completed a refinancing of all remaining bank debt and all subordinated debt from the company’s January 2001 recapitalization, allowing it to pre-pay its $41-million outstanding senior subordinated note to Choice Hotels International. The company’s new senior secured bank facility, led by JP Morgan Chase Bank and JP Morgan Securities, is $105 million, inclusive of a $10-million line of credit. According to Sunburst CEO Jim MacCutcheon: “Given that the subordinated note carried an interest rate of 11 3/8%, completion of this refinancing substantially reduces our cost of capital. Additionally, the new facility has a term of five years, so debt maturities have been favorably extended as well,” MacCutcheon added, pointing out that Sunburst is now in a position to plan for financial returns to the company’s equity investors (in the form of dividends). Sunburst’s total debt in January 2001, following management’s $370-million leveraged buy-out of the company, was $301 million. When the company recapitalized and bought out public shareholders in January 2001, the future sale of assets not deemed to be a long-term, strategic fit was critical to management’s plan, according to MacCutcheon, as was the company’s reduction of corporate overhead and operational efficiencies. Currently, Sunburst’s portfolio has been trimmed to 32 core hotels. “Our remaining portfolio is geographically focused, with hotels on excellent sites located in strong markets,” MacCutcheon maintained. Sunburst’s properties are concentrated in south Florida, the Baltimore/Washington corridor, and urban and resort markets in the Northeast and West Coast.
