The Morgans Hotel Group, formerly known
as Ian Schrager Hotels, today announced that it has completed a $475
million recapitalization, refinancing all of its third party corporate
debt and all of the debt secured by its Hudson, Royalton, Morgans,
Mondrian and Delano properties.
Ian Schrager, president of MHG, said that the new financing package both
lowers the cost of MHG’s debt and extends the maturities by, at MHG’s
option, up to five years.

“We are extremely pleased with the new financing package and the way we
were able to recapitalize the company,” Mr. Schrager said. “Our businesses
continue to outperform the market. The completion of this financing is the
last step in our program to strengthen the finances and foundation of the
company. With this behind us, we can now concentrate all of our energies
on growing and further improving the business.”

Last month, MHG announced the completion of the sale of a 90% interest in
its Paramount Hotel in New York City for $128.5 million to Becker
Ventures, a private investment company whose investments have included the
Hard Rock Hotel in Chicago.

Just a few days before that, the company announced that it had entered
into a sale/leaseback transaction on its San Francisco Clift Hotel with
affiliates of Divco West Properties, under which Divco will pay MHG $71
million and MHG will retain a 99 year leasehold, providing MHG any profit
that might ensue from operations or a capital transaction.

Clift’s plan of reorganization incorporating the sale/leaseback
transaction was filed with the United States Bankruptcy Court on June 30,
2004. The plan and the transaction are subject to Court approval. Approval
of the plan by the court is expected to occur in September 2004. Clift’s
plan of reorganization provides for the satisfaction of all of the
company’s creditors in full.
The financing for MHG’s recapitalization was provided by RBS Greenwich
Capital, Credit Suisse First Boston, and Blackacre Capital Management.

“We are flattered that such sophisticated investors, after reviewing our
financials and business plan, chose to provide the financing for
recapitalization plan,” Mr. Schrager said.
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