GlobeSt.com UPDATE: Wyndham Regrouping With $366M Sale, $2B Refi

A Wyndham spokeswoman says there is no cause for alarm about a decision made by the board in the past two weeks. The time spent on preparation--script writing to rehearsals--will be dedicated to brand development. The Dallas-based hotelier has spent five years pruning the portfolio of mid-scale properties and transitioning into a management company and owner of upscale hotels and resorts.

Wyndham's year-end report, released yesterday, showed a net loss of $509.4 million or $119.8 million more than last year. The company blamed the dive on a $426-million non-cash impairment "resulting from the effects of non-strategic assets sold or held for sale."

One hotel analyst says his peers aren't looking over Wyndham's shoulder because its equity market cap is less than $150 million. Wyndham watchers, specifically some shareholders, have speculated about the hotelier's financial security while others with a pulse on the industry once again are wondering if the hotelier's strategy is aimed at building and then selling a brand in a hot hospitality market.

The Wyndham brand certainly has value, says Rick Garlick, director of consulting and strategic implementation in the Chicago office for St. Louis-based Maritz Inc. "What they are really trying to do is strengthen their offering," he says, citing the Wyndham By Request program as an example. "They're attempting very aggressively to differentiate themselves."

The rumor that the Wyndham flag might be up for sale has been part of the shop talk for nearly four years. The corporate camp isn't commenting about whispers on the street, except to say rumors come and go.

Garlick says selling the brand is an oft-used growth strategy for the industry. But, he too can only speculate about Wyndham's underlying plan. "Nobody is ever really for sale, but everybody is always for sale," he tells GlobeSt.com. "People are always willing to talk if the price is right. The feeling is they're always more attractive when you're the least interested."

The upcoming $366-million sale to the New York City-based private fund, made up of Goldman Sachs and affiliates of Highgate Holdings Inc., will close the books on Wyndham's disposition, which got under way in June 1999 and grossed more than $2.7 billion from the sale of 185 non-strategic properties. Wyndham's 10K filing says the Goldman-Highgate deal will result in a gain of about $33.9 million. The parties inked a separate agreement for the Wyndham City Centre in Washington, DC. According to the SEC filing, the Goldman-Highgate group also will assume Wyndham's liabilities for lawsuits in Tampa, Atlanta and Toledo.

Just in the fourth quarter, Wyndham raked in $227.5 million from the sale of 19 hotels. Another $28.9 million rolled into the till so far this year with the sale of the Doubletree Glenview, IL and Wyndham Riverfront in New Orleans.

The post-sales climate has kept Wyndham in charge of 26 of the 27 branded hotels that have been sold. The company's primary growth strategy for proprietary-branded hotels is to expand via new management and franchise contracts; re-brand any convertible hotels in the portfolio; implement operating efficiencies; and build the brand through innovative programs. "The distractions are gone," Wyndham's spokeswoman says, "and it's all about focusing on our brand."

On Monday, the Greenwich, CT-based Mercury Special Situations Fund LP and Equity Resource Dover Fund LP made good on a tender offer to buy all outstanding shares of Wyndham's 9.75% Series A preferred stock for $30 per share. Malcolm F. MacLean with Mercury confirmed they acquired some of the outstanding shares, but not all of the 84,000 that they were chasing. Under its structuring Wyndham racks up penalties for not paying dividends on preferred stock. Wyndham stock closed yesterday at 87 cents per share on the American Stock Exchange.

In the SEC filing, Wyndham paints itself as "substantially leveraged" with debt payments pushing $144.8 million that are due this year and "cannot be extended at our option." The $144.8 million in debt consists of normal principal amortization and separate loans collateralized by the Wyndham El Conquistador and Wyndham Reach, both ticketed to be part of the $1.65-billion refi. If it clears, the term would be extended to 2011 and deliver up to $100 million to invest in its owned properties. For previous story, click here.

At the 2004 close, Wyndham's debt totaled $2.2 billion, of which $932.8 million resulted from 30 hotel mortgages and $41.1 million from capital lease obligations and other debt. Of the total debt, $1.9 billion carried variable interest rates. Wyndham ended 2004 with about $190 million in liquidity, of which $179.7 million is categorized as revolver availability and $10.3 million is cash in overnight accounts.