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IRVING, TX-Using a $40-million second mortgage to leverage the play, FelCor Lodging Trust Inc. has set the stage to wrap up the final package in its 2004 goal to retire $600 million in senior notes, secured in 2001 and early 2002. The REIT’s fiscal juggling this year has shaved $250 million in debt and set up a pro forma annual savings of $17 million.

“We are trying to let the market know that we accomplished our goal for this year,” Andrew J. Welch, senior vice president and treasurer for the Irving, TX-based REIT, tells GlobeSt.com. “And the good thing is we have no significant maturities until 2007.”

FelCor’s plan calls for a Dec. 31 redemption for the $34.5-million balance of the 9.5% senior notes, due in 2008. The buyback will be the fourth one in 45 days to take this year’s total to $545 million in redeemed notes and another $55 million purchased on the open market, according to FelCor. The upcoming redemption offers $1,047.50 per $1,000 of principal amount plus any accrued and unpaid interest up to Dec. 31.

Seven Embassy Suites hotels, totaling 1,925 rooms, were used to drum up the capital for the redemption. The hotels, located in several US cities, are collateralizing a $40-million second mortgage with Prudential Insurance Co. of America, which also is the lender along with the New York State Teachers Retirement System on the properties’ first mortgage. The second mortgage, set at a 6.82% fixed-rate interest, runs co-terminus with the first and carries the same terms. The mortgages mature March 15, 2009. Welch says the balance from the redemption will go into the REIT’s cash-on-hand account.

Welch says this year has been the REIT’s most active financially since 2001 when it was setting the stage for a merger with the Arlington, VA-based MeriStar Hospitality Corp. To date this year, FelCor has issued $157 million in preferred stock; $290 million in floating rate, senior unsecured notes; and $235 million in secured debt. It’s retired $600 million of 2008 notes and $175 million that matured earlier this year. Welch says this year’s play has lowered the cost of the debt by 7.3% on an outstanding total of $1.8 billion.

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