Sunstone Hotel Partnership extends tender offer for 4.6% exchangeables, increases payment

By Angela McDaniels

Tacoma, Wash., May 6 - Sunstone Hotel Partnership, LLC said it extended the tender offer and consent solicitation for its $186.01 million of outstanding 4.6% exchangeable senior notes due 2027, increased the payment and consent fee offered, and changed the proposed amendment to the indenture.

The company is now offering $700 per $1,000 principal amount of exchangeables, which includes a consent fee of $15.00. Holders will also receive accrued interest up to but excluding the payment date.

Previously, the company was offering $600 per $1,000 principal amount, and the consent fee was $5.00.

Holders may deliver consents without tendering their exchangeables, in which case they will receive only the $15.00 consent fee for every $1,000 principal amount. Holders who tender, however, must deliver consents.

The tender offer and consent solicitation began on April 17 and will expire at midnight ET on May 19, extended from May 14.

As of May 6, $19 million principal amount of exchangeables had been tendered and no separate consents had been delivered, according to a company news release.

As revised, the proposed amendment to the indenture will change the events of defaults section so that an acceleration of up to $300 million of debt of any subsidiary of Sunstone or parent company Sunstone Hotel Investors, Inc. other than a subsidiary guarantor will not constitute an event of default under the exchangeables.

The amendment as originally proposed did not include the $300 million cap.

Under the current terms of the indenture, an acceleration of debt of any subsidiary in excess of $25 million may lead to an event of default under the exchangeables if that debt is not discharged, or the acceleration rescinded, within a 30-day cure period.

Sunstone believes the proposed amendment would be beneficial to the noteholders because it would improve Sunstone's ability to cure any subsidiary loan defaults by negotiating interest deferrals or, if the collateral supporting a non-performing subsidiary loan is impaired to a value below the principal value of the loan, to negotiate a transfer of the collateral to the subsidiary lender in satisfaction of the debt.

In the company's view, either of these measures would be beneficial to the noteholders as compared to deploying cash to either subsidize or prepay non-performing loans.

The amendment and the payment of the consents-only consideration are conditioned on the receipt of consents from holders of at least a majority of the notes.

The tender offer is not conditioned on the receipt of the needed consents, and neither of the tender offer or the consent solicitation is conditioned on the receipt of financing or on any minimum principal amount of notes being tendered.

Citi (800 558-3745) is the dealer manager and solicitation agent, and Global Bondholder Services Corp. (212 430-3774 for banks and brokers or 866 857-2200) is the information agent.

Sunstone is the operating partnership of Sunstone Hotel Investors, a lodging real estate investment trust based in San Clemente, Calif.

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