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| SILVER SPRING, Md., Dec. 21, 2000 - Choice Hotels International, Inc.
(NYSE: CHH - news), the world�s second largest hotel franchiser, today
announced a corporate wide reorganization designed to provide more consistent
service for franchisees and create a more competitive overhead structure.
Choice will take a charge of up to $6.0 million related to this restructuring
in the fourth quarter.
The Company also announced that Sunburst Hospitality Corporation (NYSE:
SNB - news) intends to monetize $25 million of the remaining $60 million
note receivable from Sunburst. This monetization would lead to a charge
in the fourth quarter of approximately $4.0 million. As a result, the aggregate
cash proceeds Choice will receive from Sunburst will total approximately
$102 million. These cash proceeds will be available in January 2001 and
will be used principally to pay down debt, pursue strategic investments
and repurchase shares. The Company will also take an equity loss of approximately
$7.0 million related to its investment in Friendly Hotels plc, a U.K. based
hotel operator. The equity loss reflects the impact of Friendly�s recently
announced restructuring and asset disposition plan.
Ledsinger added: �We looked across our company with an eye toward creating a more value-added approach to serving franchisees and delivering business to their hotels. We also examined how we can increase our development of new hotels and improve our franchise sales operations. We believe the reorganization will improve our operations while reducing operating costs.� Sunburst Note On September 16, 2000, Choice announced it would receive approximately $76 million in cash plus accrued interest and a seven-year, 11-3/8% senior subordinated note in the amount of $60 million from Sunburst Hospitality Corporation. Sunburst has recently informed the Company of its intention to monetize a portion of this subordinated debt, which will result in the Company receiving in early January a total of approximately $102 million in cash and an approximately $35 million senior subordinated note. �The monetizing of the note receivable will provide Choice with additional resources to pay down debt, invest selectively in strategic initiatives, and repurchase shares,� said Ledsinger. Friendly Hotels
Choice Hotels International is the second largest hotel franchiser in the world with 4,371 hotels open, representing 349,392 rooms, and another 694 hotels under development, representing 61,244 rooms, in 41 countries as of September 30, 2000. Its Comfort, Quality, Clarion, Sleep Inn, Econo Lodge, Rodeway Inn and MainStay Suites brands serve guests worldwide. Certain matters discussed in this press release may constitute forward- looking statements within the meaning of the federal securities law. Such statements are based on management�s beliefs, assumptions and expectations, which in turn are based on information currently available to management. |
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Choice Hotels International http://www.choicehotels.com |
In
Europe, Friendly Hotels plc has announced a comprehensive restructuring
program to strengthen its balance sheet and improve its operations. Elements
of the restructuring program includes a revaluation of its real estate
portfolio, disposal of non-core assets, renegotiation of certain commercial
arrangements with Choice, and a future strategy focused on growth of its
franchising business. To improve Friendly�s competitive position
in Europe, Choice has agreed to forgive certain royalty fees due over the
next five years and to provide Friendly with a letter of credit in an amount
up to #7.8 million (approximately US $11.5 million) to guarantee additional
credit facilities from Friendly�s banks. The Choice letter of credit will
be secured by substantially all of Friendly�s assets in France and Germany,
valued in excess of #8 million (approximately US $11.8 million). In consideration
for this support, Friendly will increase the conversion rate from 0.67
ordinary shares for each of Choice�s convertible preferred shares to 1.67
ordinary shares for each convertible preferred share. The effect of this
change in conversion price is to increase Choice�s fully diluted ownership
in Friendly from the current level of 44% to approximately 69%. As a result
of this restructuring initiative, Choice will record an equity loss of
approximately $7.0 million.