Early debt redemption, by virtue of the planned sale of non-strategic assets and strong operating cash flow, has allowed Sunburst Hospitality to reduce its bank credit facility from $280 million to $170 million, which includes an unused $20 million revolving line of credit.

The bank credit facility was amended to lower the average interest rate by nearly two full percentage points, and its term was extended one year to December 31, 2006. The financing was arranged by J.P. Morgan Securities Inc. Lenders participating in Sunburst�s bank credit facility include, among others, JPMorgan Chase Bank as the administrative agent, SunTrust Bank as the documentation agent and Fleet National Bank as the syndication agent.

�Rapid debt reduction subsequent to the leveraged buy-out was the principal strategic and tactical objective of our management team. We are pleased to announce the achievement of this goal ahead of schedule, not withstanding a challenging economic environment,� commented Sunburst CEO Jim MacCutcheon in making the announcement.

�Reducing debt in accordance with our original plan provides Sunburst with a strong balance sheet. This will allow us to pursue judicious growth opportunities as we move ahead,� said Mr. MacCutcheon.

Although he did not disclose areas targeted for potential growth in making the announcement, Mr. MacCutcheon remains highly enthusiastic about the benefits of Sunburst�s existing presence in strong markets, particularly with properties in the extended-stay segment via MainStay Suites.

�As expected when the MainStay concept was developed, extended-stay business is more resilient in a downturn due to its low break-even occupancy and the nature of its demand,� said Mr. MacCutcheon.

Sunburst Hospitality�s success in maintaining strong operating cash flow since September 11, 2001 distinguishes the company as one of the most savvy hotel companies operating today. Despite a challenging environment, Sunburst also successfully completed its asset disposition program and related debt repayment 16 months ahead of schedule.

The bank credit facility amendment comes on the heels of a credit rating affirmation by Moody�s Investor�s Service earlier in the summer. Moody�s had placed Sunburst, along with several other hotel companies, on review for potential downgrade in late 2001 in anticipation of credit deterioration resulting from the widespread travel downturn. In response to a report and presentation made by Sunburst Hospitality executives, Moody�s confirmed the Company�s current credit ratings and removed the Company from its credit watch list.

�Moody�s confirmation of our rating, affirms Sunburst Hospitality�s strong position in terms of operations and real estate management,� stated James MacCutcheon, CEO of Sunburst Hospitality in response to the news.

Moody�s Investors Service stated that their decision was based on Sunburst�s ability to dispose of non-core assets and pay down debt significantly ahead of schedule, the company�s strong operating track record in the face of adversity and the gradual improvement of lodging industry demand.

These elements, coupled with Sunburst Hospitality�s skillful management of its real estate assets, positioned the company for success even during a downturn, according to Mr. MacCutcheon. 

Sunburst Hospitality Corporation is a leading hotel owner and manager of nationally recognized hotels and operates in 24 states. Sunburst's hotels are branded as Comfort Inns and Suites, Holiday Inn Express, MainStay Suites, Quality Inn, Clarion and Sleep Inn. 

James A. MacCutcheon, the company's president and CEO, has been with the company and its predecessor organizations since 1987. Since that time, Sunburst has grown from a small portfolio of 11 hotels to 52 hotels. Annual revenues in 2001 approximated $150 million.

Prior to the most recent hospitality industry downturn, the Company was able to liquidate a substantial portion of its existing hotel portfolio. The Company capitalized on the distressed real estate and capital markets in the early 1990s by opportunistically acquiring hotels at significant discounts to replacement cost. In 1995, the Company responded to changing industry cycles by shifting its growth strategy to construction of mid-market, all-suite extended-stay MainStay Suites hotels. In January 2001, management completed a leveraged buy-out of the Company, which formerly traded on the New York Stock Exchange.