Interstate Hotels Corporation (Nasdaq:IHCO) today announced that CGLH Partners I LP and CGLH Partners II LP, an investor group led by Lehman Brothers, made a $30 million investment into Interstate pursuant to an agreement signed on August 31, 2000. Under the approved agreement, Interstate issued $5 million of preferred stock to CGLH Partners I LP and $25 million in subordinated notes to CGLH Partners II LP. The preferred stock and notes each have 8.75% per annum coupon rates and are together convertible by the investor group into up to 49% of Interstate’s then-outstanding common stock at $4.00 per share conversion rate. Both the preferred stock and notes mature in 2007. The transaction was approved by Interstate’s stockholders, at a stockholders’ meeting held Monday, October 16th, for that purpose. In connection with this investment, Interstate will acquire Wyndham International, Inc.‘s 55% non-voting economic interest in Interstate Hotels, LLC pursuant to an Agreement signed on August 31, 2000.
“Aligning with a capital partner who shares our commitment to growth has been a key strategic objective since our spin-off last year,” Thomas F. Hewitt, Chairman and Chief Executive Officer of Interstate Hotels Corporation. “We believe that this alliance with the investor group represents a significant and substantial step for the Company, as it will allow us to achieve our long-term growth strategy.”
Interstate simultaneously entered into a joint venture agreement with the investor group whereby Interstate will invest $25 million of the new capital, along with additional capital from the investor group, to selectively acquire hotel properties that will be managed by Interstate. Interstate and the investor group believe the joint venture partnership can acquire up to $300 million of hotel assets.
Interstate also expects to close this quarter on a $25 million senior secured revolving credit facility arranged by Lehman Brothers Holdings Inc. which Interstate expects to draw upon to make minority investments to obtain management contracts.
Interstate Hotels Corporation operates approximately 160 hotels with more than 30,000 rooms in 38 states in the United State as well as Canada, the Caribbean and Russia. For more information, visit www.interstatehotels.com.