Host Marriott $375 million convertible talked at 2.75-3.25%, up 50-55%

By Ronda Fears

Nashville, March 9 - Host Marriott LP launched $375 million of 20-year exchangeable notes, which convert into Host Marriott Corp. shares, after Tuesday's close, with guidance for a 2.75% to 3.25% coupon and a 50% to 55% initial conversion premium.

Goldman Sachs & Co. is bookrunner of the Rule 144A issue, which is scheduled to price after Wednesday's close. Merrill Lynch & Co. and UBS Investment Bank are co-managers.

The senior secured debentures will be non-callable for five years with puts in years six, 10 and 15. There is a 120% contingent conversion trigger.

There is a $75 million greenshoe available.

Proceeds are earmarked to redeem the Host Marriott LP 7.875% series B senior notes due 2008.

Moody's has rated the new issue Ba3 with a stable outlook.

Given the use of proceeds, Moody's said the transaction will be accretive to earnings and enhance the laddering of the debt maturities, among other benefits. Moody's also noted substantial liquidity and capital structure improvements at Marriott.

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