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FelCor Prices Debt Offering

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FelCor Lodging Trust Inc. , a real estate investment trust (REIT), has recently priced a debt offer of senior unsecured notes worth $525 million. The debt offering is likely to increase the liquidity of the company to repay its outstanding liabilities.

The notes are scheduled to mature in 2023 and bear interest at 5.625%. FelCor primarily intends to utilize the proceeds to redeem approximately $258 million worth of 10% senior notes due 2014 and repay a $186 million mortgage loan due 2013. The remainder of the proceeds would be used for general corporate purposes.

Incidentally, FelCor has also updated its outlook for full year 2012 in the recent past to better reflect the adverse effects of Hurricane Sandy on its business. Although the company reported minimal physical damage to its properties, the hurricane had a material impact on its operations and was likely to affect its profitability.

FelCor presently expects a same-store RevPAR (revenue per available room) growth of 5.25% – 5.75% versus an earlier projection of 5.50% – 6.00%. Adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) is expected to be in the range of $198.0 million – $202.0 million, compared to earlier estimates of $200.0 million – $204.0 million.

In addition, FelCor reduced its fiscal 2012 adjusted FFO (funds from operations) guidance from 21 cents – 25 cents to 19 cents – 23 cents. The current Zacks Consensus Estimate for 2012 is pegged at 22 cents.

FelCor currently owns 66 upper-upscale full-service hotels and resorts in 22 states in the U.S. under globally recognized brands such as – Embassy Suites Hotels, Doubletree, Hilton, Marriott, Renaissance, Fairmont, Sheraton, Westin and Holiday Inn. Most of the properties of the company are located in major markets across the country.

We have a Neutral recommendation on FelCor, which presently has a Zacks #3 Rank that translates into a short-term Hold recommendation. We also have a Neutral recommendation and a Zacks #3 Rank for Host Hotels & Resorts Inc. (HST - Free Report) , one of the competitors of FelCor.

Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

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