The plan was scuttled as soon as per share prices fell below an $18.40 benchmark drafted into the merger agreement, FelCor president and CEO Thomas J. Corcoran Jr. tells GlobeSt.com. Stock for both companies was trading above $19 per share Sept. 17 and fell the following Thursday to $12 for FelCor and $9 for MeriStar. The plummet immediately killed the plans. "At this time, we are focused on our own respective companies," says Corcoran. MeriStar's management foothold on FelCor's 112 hotels is not affected by the decision.
The $15-million loss comes from putting together a $700-million credit line that is no longer needed. J.P. Morgan Securities Inc. and Deutsche Banc Alex orchestrated the credit line with Bank of America, Salomon Smithy Barney Inc. and Wells Fargo Bank National Association. There is no cause for alarm since FelCor has drawn down only $40 million of its existing $615-million credit facility, according to Corcoran.
Consequently, FelCor's Oct. 11 special stockholders' meeting is canceled. Instead, FelCor is checking the calendar to schedule a third-quarter conference call to break the news to shareholders as to what occurred and how hard it will impact their investments. Corcoran says the call most likely will take place in October. For now, FelCor is standing behind its 55-cent dividend for stockholders of record as of Oct. 1 and 79-cents FFO.
It's not a time for rash decisions or crystal ball forecasts as to whether the merger, poised to position FelCor into the nation's largest hotel REIT, will ever return to the table, emphasizes Corcoran. "It's too premature to make judgment calls in what has been a difficult time in the country," he says.
Corcoran did say last week's daily occupancy reporting from FelCor lodges nationwide showed better numbers than he anticipated. "There's a lot of business still out there and a lot of markets, not convention markets, that are still doing business," he concludes. Only the foolhardy, he adds, would "make any conclusions based on last week's market. These are the times to let things work through.
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