PITTSBURGH Interstate Hotels Corporation announced that it has entered into an agreement with an investor group, whereby the group, led by Lehman Brothers, will make a $30 million investment into Interstate in the form of equity and convertible debt.
Interstate also has signed a joint venture agreement with the investor group, to acquire hotel properties to be managed by Interstate. The joint venture partnership believes it can acquire up to $300 million of assets.
Under the agreements, Interstate will issue to the investor group $5 million of preferred stock and $25 million in subordinated notes. The preferred stock and notes each have coupon rates of 8.75% per annum and are together convertible by the investor group into up to 49% of Interstate s then-outstanding common stock at a conversion rate of $4.00 per share. The preferred stock and notes mature in 2007.
As part of the transaction, Interstate also expects to close on a $25 million senior secured revolving credit facility arranged by Lehman Brothers Holdings Inc. The company plans to draw upon the facility to make minority investments to obtain management contracts.
In connection with the investor group investment, Interstate has agreed to acquire from Wyndham International, its 55% non-voting economic interest in Interstate Hotels, LLC, a subsidiary of the company. (9/1/00)