Blackstone Taps Chemical in Bid For Days Inns

Blackstone Group is returning to Chemical Bank to help finance its latest deal - the proposed acquisition of the Days Inns of America Inc. franchise system for $250 million in cash and securities.

Blackstone, a New York-based merchant banking firm, is seeking a total of about $300 million in new loans from Chemical. Roughly $100 million would be used to refinance existing bank debt stemming from Blackstone's purchase of the Ramada and Howard Johnson franchise systems from Prime Motor Inns.

Bankruptcy Filing

Chemical led that credit, with Banque Paribas and Long Term Credit Bank of Japan acting as coagents.

The proposed Days Inns transaction, which was announced Monday, is subject to the approval of the federal bankruptcy court in Wilmington, Del., where Days Inns filed last Friday for protection under Chapter 11 of the bankruptcy code.

Blackstone, working with partners Time Warner Inc. and Wertheim Schroder, is also buying Six Flags Corp. with financing from Chemical. Just last week, the bank committed to underwrite most of a $450 million credit for the Six Flags deal, which is valued at about $700 million.

While more modest in size, the bank financing for the Days Inns transaction - which includes the purchase of the Days Inns name and trademarks - underscores that in the deals business, relationships count.

No Commitments Yet

Henry Silverman, a Blackstone partner, expressed confidence that the new bank financing would be available, even though commitments are not yet in hand.

"We expect the banks will increase the [existing] facility," Mr. Silverman said.

The loan used to finance the Prime Motor deal is priced at 250 basis points over the London interbank offered rate. Though not yet set, pricing of the Days Inns credit probably would be similar.

The $250 million purchase would comprise about $200 million in cash and $50 million of stock in a Blackstone subsidiary called Hospitality Franchise Systems Inc.

Proceeds from the sale would be divided among Days Inns' various creditors, who must also approve the sale to Blackstone.

Right now, there are "varying degrees" of creditor support for the deal, said Andrew Heyer of Argosy Group, Days Inns' financial adviser.

He said the creditor groups generally agree that the assets should be sold, but the question of how to allocate the proceeds among the different classes of creditors still must be resolved.

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