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SCMP Reporter

MARRIOTT International Inc has filed with the US Securities and Exchange Commission to sell US$150 million of 10-year bonds, just a month after an acrimonious Marriott Corp split in two to create Marriott International.

    The bond sale would be the first since Marriott proposed the re-organisation in October 1992, enraging bondholders who saw the value of their investments plunge as much as 30 per cent before recovering.

  Some investors said they would not take another chance.

    ''They're sleaze buckets,'' Barbara Kenworthy, who manages about $500 million for Dreyfus Corp, said of Marriott. Ms Kenworthy said she doubted Dreyfus would buy the bonds.

  Marriott's split created Marriott International, a profitable hotel-management company with little debt, and Host Marriott Corp, a money-losing, debt-laden owner of hotels, retirement homes, and toll-road and airport concessions.

  The re-organisation hurt the company's bonds because Marriott shifted most of its $3 billion debt to Host Marriott.

  Marriott raised the ire of bondholders because they were left with the securities of a riskier company.

   The company's $1.9 billion of publicly traded bonds were reduced to junk-bond status by rating companies after the restructuring was announced.

  Meanwhile, Marriott's stock almost doubled before the split.

  Bond investors led by Teachers Insurance and Annuity Association, the California Public Employees' Retirement System (Calpers) and IDS Financial Services, reached a settlement with the company in March.

  The settlement paved the way for Marriott shareholders to approve the split in July. Completion of the restructuring plan followed an exchange offer for about $1.5 billion of its debt and a ruling by the Internal Revenue Service that the transaction was tax-free.

  At the time of the split, analysts said the bondholder agreement could let Host Marriott sell securities to the public and help reduce its debt.

   In July, Marriott chief financial officer Stephen Bollenbach said Host Marriott could raise money through sales of junk bonds and shares of real estate investment trusts.

  Meanwhile, Marriott remains in a legal battle with another group of bondholders led by PPM, a unit of Britain's Prudential Corp.

  The PPM group claimed that the company knew about its plans when it sold bonds about six months before announcing the restructuring, and failed to provide any warning.

  Bond investors said they might try to punish Marriott International by demanding higher yields than those paid by similarly rated companies.

  When shareholders approved the split, chairman J.W. Marriott said he expected the company to gain an A rating.



Marriott irks bondholders on unit sale