Paine Webber Real Estate Securities Inc. is joining a group of banks and nonbank lenders in leading a $1.4 billion syndicated loan package for Patriot American Hospitality Inc.
The funds will be used in part to back the real estate investment trust's pending purchase of Wyndham Hotel Corp. and 11 Wyndham-managed hotels.
Equally underwriting the deal with Paine Webber is Citicorp Real Estate Inc., which will act as payments administrator and collateral agent, and Merrill Lynch Capital Corp. and Bankers Trust Co. All four are co- syndication and administrative agents on the credit.
Real estate and especially real estate investment trusts (REITs) are becoming hot properties in the capital markets, according to market sources, and the flow of deals in the sector is expected to surge this year.
The Patriot credit will be split between a $600 million revolving line of credit and term loans totaling $800 million, said William W. Evans 3d, who is with the office of the chairman at Patriot and who directed negotiations on the credit facilities for the REIT.
The term loans are divided among three tranches of between four and five-and-a-half years.
Pricing, said a source close to the deal, begins at 187 basis points above the London Interbank Offered Rate for the revolver, and begins at 212 basis points above the London Interbank for the shorter term loan. Patriot is the second-largest hotel real estate investment trust in the country.
The revolver will fund acquisition of additional properties and other assets, capital expenditures and general working capital purposes.
Of the $800 million in term loans, $200 million will be designated solely for cash payments in connection with the $1.1 billion acquisition of Wyndham and the 11 related hotel acquisitions, with the balance to be used for existing debt repayment and other acquisitions expected to close this quarter.
"Patriot's strategy has consistently been to maintain maximum financial flexibility to take advantage of acquisition opportunities as they arise," said Mr. Evans. The loans "ensure that Patriot maintains this flexibility, which has contributed significantly to Patriot's rapid growth."
Paine Webber led Patriot's $380 million initial public offering in 1995 and a subsequent $160 million equity issue last July, and is acting as adviser to Patriot in the Wyndham acquisition.
"Paine Webber got the assignment because they are the present lender to Patriot American," said Mr. Evans, not because of its advisory role.
