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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): December 5, 2001
Host Marriott Corporation
(Exact Name of Registrant as Specified in Charter)
Maryland 001-05664 53-0085950
(State or Other Jurisdiction (Commission File Number) (I.R.S. Employer
of Incorporation) Indemnification no.)
10400 Fernwood Road
Bethesda, Maryland 20817
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (301) 380-9000
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Item 5. Other Events.
Host Marriott Corporation reported the following information today.
DISCLOSURE RELATING TO INDEBTEDNESS
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Operating Results
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We recorded the following hotel operating statistics for our comparable
hotels for the four week accounting periods ended October 5, 2001, and
November 2, 2001.
Occupancy Rate RevPAR % Change
---------- ------- ------- ----------
Four weeks ended October 5, 2001 54.6% $141.27 $ 77.11 (42.7%)
Four weeks ended November 2, 2001 69.3% $149.96 $103.94 (25.8%)
Subsequent to November 2, 2001, we have continued to see improvement in
RevPAR, although results are still well below prior year levels. Although we
are still experiencing operating difficulties as a result of the economic
recession and the effects of the September 11, 2001, terrorist attacks at the
New York World Trade Center and the Pentagon and conditions remain volatile, the
RevPAR results for our portfolio of hotels, to date, have been slightly better
than our managers' initial forecast for the post-September 11th portion of 2001.
Similarly, our post-September 11, 2001, operating margins, although below prior
year and pre-September 11th levels, have exceeded our managers' initial
expectations due to extensive cost-cutting efforts at our properties.
Dividends
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Our Board of Directors has authorized the payment of a dividend of $.625
per share on our Series A, B, and C preferred stock for the fourth quarter of
2001 on January 15, 2002, to holders of record on December 31, 2001. The Board
of Directors at the same time decided to temporarily suspend the payment of the
dividend on our common stock.
Bank Credit Facility
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As a result of the effects on our business of the economic recession and
the events of September 11, 2001, we have entered into an amendment to our bank
credit facility, effective November 19, 2001, which, among other things,
provides more flexibility under certain financial covenants through August 15,
2002. The amendment limits draws under the revolver to not more than $50 million
in the first quarter of 2002 and up to $25 million in the second quarter of 2002
(but only to the extent less than $25 million is outstanding from any first
quarter draws) of 2002 and increases the interest rate between 25 and 75 basis
points on outstanding amounts depending on leverage levels. In addition, the
amendment imposes certain restrictions through August 15, 2002, including
restricting our ability to pay dividends on our capital stock and our QUIPs
unless estimates indicate such payments are necessary to maintain our REIT
status and/or unless we are below certain leverage levels. In addition, the
amendment places certain limits on our ability to make acquisitions and
investments and requires us to use all net proceeds from asset sales (excluding
the sale of the Vail Marriott), equity issuances and debt incurrences to repay
indebtedness under the bank credit facility. We believe that it is likely that
we would meet the applicable ratios necessary to pay the dividends on the
preferred, but not the common stock, through August 15, 2002.
A copy of the credit facility amendment is attached to this Form 8-K as
Exhibit 10.41.
Debt Compliance
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We are currently in compliance with the terms of our indenture and bank
credit facility. As a result of amending financial covenants, we expect to
remain in compliance with the credit facility through August 15, 2002, the date
after which the modified covenants will return to the levels that were in effect
prior to this amendment. We anticipate that we will not be able to comply with
certain financial covenants applicable after August 15, 2002. If we fail to
comply with any covenant in the bank credit facility, we would be in default. We
anticipate that we will have to refinance or repay our bank credit facility or
obtain another amendment from our lenders to modify financial covenants. We can
offer no assurances that our lenders will agree to further amendments that would
be necessary to avoid our being in default under the bank credit facility.
Additionally, we cannot assure you that we will be able to obtain the funds
necessary to repay the bank credit facility. Moreover, any default under the
bank credit facility which results in an acceleration of the final stated
maturity would constitute an event of default under our indentures with respect
to all outstanding series of senior notes.
As a result of the effects on our business of the economic recession and
the events of September 11, 2001, we anticipate that the consolidated interest
coverage ratio under our senor note indenture that is calculated using the four
full fiscal quarters ended after March 31, 2002, will likely not be greater
than, or equal to 2.0 to 1, which would not constitute a default, but would
generally prohibit making restricted payments and incurring indebtedness and
issuing disqualified stock under the indenture. Notwithstanding the restricted
payment prohibition, however, we are permitted under the indenture to make
distributions that are necessary to permit Host REIT to maintain its status as a
REIT under the Internal Revenue Code. We intend to continue our practice of
distributing quarterly an amount of our available cash sufficient to enable Host
REIT to pay quarterly dividends on its preferred stock and common stock as
permitted to the extent necessary to satisfy the requirements applicable under
the Internal Revenue Code to REITs. We cannot assure you that our failure to
have a consolidated coverage ratio of less than 2.0 to 1 will not limit our
ability to engage in activities that may be in our long-term best interest.
Forward-looking Statements
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Certain matters discussed herein are forward-looking statements. We have
based these forward-looking statements on our current expectations and
projections about future events. We identify forward-looking statements in this
report on Form 8-K by using words or phrases such as "believe," "expect," "may
be," "intend," "predict," "project," "plan," "objective," "will be," "should,"
"estimate," or "anticipate," or the negative thereof or other variations thereof
or comparable terminology. All forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause our actual
transactions, results, performance or achievements to be materially different
from any future transactions, results, performance or achievements expressed or
implied by such forward-looking statements. Although we believe the expectations
reflected in such forward-looking statements are based upon reasonable
assumptions, we can give no assurance that we will attain these expectations or
that any deviations will not be material. Except as otherwise required by the
federal securities laws, we disclaim any obligations or undertaking to publicly
release any updates or revisions to any forward-looking statement contained in
this report on Form 8-K to reflect any change in our expectations with regard
thereto or any change in events, conditions or circumstances on which any such
statement is based.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(C) Exhibits.
Exhibit No. Description
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10.41 Third Amendment and Modification to Amended and Restated
Credit Agreement, dated as of June 19, 1997, as amended
and restated as of August 5, 1998, and as further amended
and restated as of May 31, 2000 among Host Marriott
Corporation, Host Marriott, L.P., Various Banks, and
Bankers Trust Company, as Administrative Agent dated as
of November 19, 2001.
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
HOST MARRIOTT CORPORATION
By: /s/ Donald D. Olinger
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Date: December 5, 2001 Name: Donald D. Olinger
Title: Senior Vice President and
Corporate Controller