GlobeSt.com UPDATE: Hotelier's $3B Buyout Heads Into Final Stretch

If New York City's Blackstone wins out, Wyndham will become a wholly owned, private subsidiary, Wind Hotel Holdings Inc. With the company's heavy-hitters backing the merger, it's unlikely that it will be rejected. Wyndham's back-up plan would keep it publicly traded, but a recapitalization is a must.

The Dallas-based hotelier is shouldering $208.1 million in loan payments due for the remainder of this year and $1.8 billion of total debt. Just since the end of Q1, its debt load spiked $130.2 million, according to an earnings report released three days ago. The Wyndham team blames the hit on $100 million of costs associated with a $1.65-billion refinance. Should the Blackstone merger get scuttled, Wyndham will take another hit of $49.5 million for terminating the agreement, according to the SEC filing. The stockholders' meeting is set for 9 a.m. Aug. 11 at the Wyndham Anatole Hotel in Dallas. The plan is to ink the merger as soon as possible after it clears shareholders' hands.

In preparation for the merger, Wyndham has revised its five-year-old timeshare agreement with the Orlando-based Tempus Resorts International Ltd., an affiliate of Apollo Investors. Under the quietly orchestrated revision in mid-July, the parent or Tempus can terminate the timeshare agreement within 30 days of the merger. If its parent cancels the contract, Wyndham will be required to pay $43.75 million to Tempus plus forced to provide services for a limited time period.

Because Wyndham is in the registration period, interviews aren't being granted. In the earnings release, Fred J. Kleisner, Wyndham's chairman, president and CEO, paints a picture that the Blackstone merger "will culminate a long and rewarding journey--a path taken to position Wyndham for long-term success by implementing strategies that helped us simplify our corporate structure, dramatically reduce our debt, and sell all our non-strategic assets."

But, the SEC prospectus, whether it's legalese or reality, paints a grimmer picture if shareholders ax the merger. "There can be no assurance that we will be able to meet our debt service obligations and, to the extent that we cannot, we may lose some or all of our assets, including hotel properties," according to the filing.

At the second-quarter close, Wyndham posted non-cash losses of $78.4 million in the second quarter versus $394.9 million in Q2 2004 and a year-to-date loss of $98.3 million. Last year, the hotelier lost $509.4 million and the prior year, $629.2 million. The hotelier blamed last year's hit on a $426-million non-cash impairment on sales of non-strategic assets and those still held for sale. For previous story, click here.

In the second quarter, Wyndham sold two hotels in Manhattan and Atlanta for gross proceeds of $23.7 million. Coming up soon is the sale of the Wyndham Toledo, the last of 25 deeds rolling to Goldman Sachs Group in a $366-million transaction. The last non-core asset, the Park Plaza in New Orleans, is under negotiation, GlobeSt.com is told.

The rest of the hotelier's financials put adjusted Q2 EBITDA at $62 million, which exceeds company guidance and up 24% from last year. The quarterly adjusted EBITDA excludes a $5.9-million accrual for a judgment from a lawsuit filed in 2001. RevPAR rose 7.4% to $119.02 in the quarter, the company reports.