WYN has hired a restructuring adviser and a lawyer specializing in bankruptcy, a source familiar with the situation said on Thursday.
A spokesman for Wyndham, whose problems have been magnified by the U.S. travel industry crisis in the aftermath of the Sept. 11 attacks, would not confirm or deny the move but said the company was confident in its liquidity.
While Wyndham's hiring of counsel and advisers could indicate the company is considering bankruptcy, those steps could also be posturing moves to pressure creditors into renegotiating Wyndham's large debt, the source, who spoke on condition of anonymity, told Reuters.
The source declined to name the advisers and counsel.
Wyndham faces a Feb. 28 deadline in ongoing talks with lenders aimed at renegotiating the terms on some of its debt, according to its own filings with securities regulators.
Company spokesman Andrew Jordan said Wyndham, which has an interest in 129 hotels nationwide, is focused on coming to terms with its creditors and said that its operations are now cash-flow positive.
``We're pretty confident about our liquidity right now, and pretty confident we'll come to an amendment with our credit facilities,'' he said.
The company's stock price has dropped sharply since British suitor Six Continents Plc (quote from Yahoo! UK & Ireland: SXC.L) walked away from a proposed merger of the two companies after the Sept. 11 attacks on the Pentagon and World Trade Center.
Wyndham's share price dropped $1.14 -- or nearly 50 percent -- to $1.26 when trading resumed after Sept. 11. But while other hotel stocks have rallied since then and are at or near their pre-attack levels, Wyndham shares have fallen further and now trade in the 50-55 cent range.
According to its most recent quarterly earnings report, Wyndham's current debt totals about $3.4 billion, including $1.3 billion outstanding in term loans and $1.3 billion of mortgage debt.
By comparison, the company reported that earnings before interest, taxes, depreciation and amortization (EBITDA), a prime measure of a company's operating health, totaled $75 million in the third quarter, down 43 percent, from $132 million a year ago.
DEBT MATTERS
Even before the drop in business that started this spring and accelerated after Sept. 11, Wyndham was aggressively marketing its hotel portfolio in a bid to reduce its debt.
The company laid out a three-year plan beginning in June 1999 under which it said it identified $2.5 billion in nonstrategic assets for possible sale. The company sold $890 million worth of assets between then and the end of the third quarter this year, but was still looking to sell another $1.6 billion worth.
Like other hotel companies whose business dropped sharply after Sept. 11, Wyndham also disclosed in its third-quarter report filed last month that it anticipated it would be out of compliance with certain financial ratio covenants in its credit agreement.
Accordingly, Wyndham's lenders agreed to a covenant waiver in the third and fourth quarters of 2001. That waiver is effective through Feb. 28, 2002.
If a new extended agreement is not reached by March 1, Wyndham said, its lenders would be entitled ``to accelerate the maturity of the amounts owed them under the loan agreements.''
``If the lenders were to accelerate the maturity of the amounts due under the loan agreements, the company likely would be required to take necessary and appropriate action to protect itself and its assets,'' Wyndham said in its filing. |
