The first play calls for buying up to $475 million of the outstanding $575 million of 9.5% senior notes that mature in 2008. The next move is a new issuance of up to $350 million of senior floating rate notes. Working simultaneously will be a $175-million redemption of 2004 bonds funded by a $172-million pull-down of a JPMorgan-secured line.

"The net effect will be $125 million of less debt," Thomas J. Corcoran Jr., FelCor's president and CEO, tells GlobeSt.com about the strategy behind the tender offer, redemption and new issuance. The plan is coming to market about a month after FelCor raised $105 million in a preferred market offering of 4.6 million shares.

"Less interest expense, that's why we're doing it," Corcoran says. The deals are structured to strip $23.5 million from annual interest payments. If all goes as planned, this year's tab will be $144.5 million versus the $167 million doled out last year. The plan's built-in pluses are an extension of debt maturities and improved financial leverage.

The REIT's stepped-up attack on debt has slashed $200 million since March 31, 2003. Another $400,000 was saved just two months ago by terminating a $50-million unsecured credit line. More fuel will come from additional hotel sales. To date this year, seven sales collected $43 million and there are another 28 hotels, priced at $200 million, still up for grabs in a strategic portfolio pruning. FelCor is eliminating multiple holdings in growth markets and using proceeds to reduce debt while it scouts buying opportunities for select business-class hotels and resort properties.

Under the three-pronged plan, the early tender offer, with a $20 premium, is in effect until 5 p.m. EST May 24. Shareholders are being offered $1,072.05 per $1,000 principal amount of the 9.5% senior notes. When the tender offer kicks in, the offer dips to $1,052.05 per $1,000 principal amount. That deal is on the table until midnight EST June 8.

The buyback is contingent upon the REIT getting dibs on at least $350 million of the 9.5% senior notes. The barebones minimum equals the amount of the floating rate issuance, which matures in 2011. Pricing and rates have yet to be set. The floating rate vehicle and part of the REIT's $325 million in excess cash are funding the tender offer, being managed by Deutsche Bank Securities Inc. of New York City. As in all such plays, FelCor can pull the plan or seek an extension if the minimum falls short at the deadline.