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MARRIOTT REACHES AGREEMENT WITH BONDHOLDER GROUP; COMPANY TO MAKE BOND EXCHANGE OFFER EXTENDING MATURITIES

 WASHINGTON, March 11 /PRNewswire/ -- Marriott Corporation (NYSE: MHS) said today that it has reached an agreement in principle -- to modify certain terms of its planned special dividend -- with representatives of institutions holding approximately $400 million of its bonds, and with representatives of the plaintiffs who have instituted class action litigation on behalf of bondholders. The agreement contemplates an exchange offer that would provide new bonds, with higher interest rates and extended maturities, to those who accept the offer.
 "We are pleased to have reached agreement in principle with bondholders who own a large portion of our bonds," said J.W. Marriott Jr., chairman and president of Marriott Corporation. "We believe the contemplated modifications preserve the benefits and strategic objectives of the special dividend for our businesses and shareholders, while addressing bondholder concerns," he said.
 The company said the agreement in principle and the exchange offer are subject to various conditions, including reaching mutual agreement on definitive documentation.
 Marriott Corporation announced in late December 1992 that it was engaged in discussions with bondholders regarding Marriott's planned special dividend that would divide Marriott into two separate companies. Under the proposed transaction, originally announced on Oct. 5, 1992, one company -- to be named Marriott International, Inc. -- would include Marriott's lodging, food service and facilities management, and senior living service operations. The other -- the present company renamed Host Marriott Corporation -- would retain most of Marriott's real estate properties as well as its airport and tollroad concession businesses.
 After the special dividend, shareholders would have an identical number of shares in each company. Marriott said the transaction is targeted for completion in the summer of 1993, and closing is not contingent upon the outcome of the exchange offer.
 The special dividend is conditioned upon, among other things: Declaration by Marriott Corporation's board of directors, ratification by a majority of Marriott shareholders, and receipt of an affirmative ruling from the Internal Revenue Service that the special dividend will be tax-free.
 "Marriott International's per share earnings will not be materially affected by the proposed modifications. It will continue to have a strong capital base with ample investment capacity to pursue strategic growth," stated Marriott. "At the same time, Host Marriott's debt will be significantly reduced and most of its bond maturities extended beyond 1998, if the exchange offer is successfully completed."
 At the end of 1992, Marriott Corporation had approximately $3 billion of long-term debt, of which $1.9 billion was in the form of publicly traded bonds. Approximately $1.4 billion of the bonds outstanding at year-end 1992 are expected to mature or be redeemed by the end of 1998.
 The company explained that it has reached agreement with a group of institutional bondholders--including IDS Financial Services, Teachers Insurance & Annuity Association, California Public Employees' Retirement System (CALPERS) and Allstate Life Insurance Company. These bondholders are represented by Wachtell, Lipton, Rosen & Katz and Goldman, Sachs & Co., and have not initiated litigation. Agreement also has been reached with the plaintiffs in eight class action lawsuits filed against the company which have been consolidated by the U.S. District Court for the District of Maryland. Class action plaintiffs are represented by Milberg Weiss Bershad Specthrie & Lerach and Rothschild Inc.
 Marriott has not reached an agreement with PPM America and several other institutions that have filed suit against Marriott and are said to represent about $120 million of its bonds.
 The exchange offer would be made available to all bondholders. Bondholders participating in the exchange offer would be required to release any claims and abandon any litigation related to the special dividend. The company said the exchange offer will only be made by means of a prospectus included in a registration statement to be filed with the Securities and Exchange Commission (or under an exemption from registration), and will be subject to all applicable legal requirements. The registration statement is expected to be filed in about a month.
 Proposed refinements to the special dividend, some or all of which may be contingent on consummation of the exchange offer, include:
 -- Transfers of approximately $450 million of additional debt and additional assets to Marriott International. These assets include leased land and two retirement communities. Another 14 retirement communities will be leased by Marriott International from Host Marriott.
 -- Issuance of up to $70 million of Marriott Corporation common stock to retire public bonds.
 -- Provision by Marriott International of mortgage financing for Host Marriott's Philadelphia Marriott Hotel, now under construction, of up to $125 million.
 -- Funding $200 million of a $630 million line of credit -- to be provided by Marriott International to Host Marriott -- at the closing of the bond exchange, and extending the availability of the credit line to 2007.
 As a result of these actions, Host Marriott's total debt would be reduced by approximately $500 million (assuming 100 percent participation in the exchange offer). Interest rates on the exchange bonds would be 100 basis points higher, and the bonds generally would have maturities extended approximately four years later, than the present Marriott bonds. The exchange bonds would be issued by a Host Marriott subsidiary. The subsidiary would not be obligated on the line of credit to be provided by Marriott International. To complete the exchange, holders of 85 percent of all series combined and 51 percent of each individual series must agree to the exchange.
 In addition, under the agreement with the class action plaintiffs, Host Marriott would pay $1 million for attorneys fees and expenses and provide warrants to purchase up to 7.7 million shares of its common stock, for the benefit of former bondholders who disposed of their bonds after Oct. 5, 1992, and cannot participate in the exchange offer. The warrants, to be exercisable for a period of five years following consummation of the special dividend transaction, will carry an exercise price of $8 per share during the first three years and $10 per share during the fourth and fifth years.
 "The refinements and exchange offer will not significantly affect Marriott International's earnings per share or its capacity for growth," said Stephen F. Bollenbach, executive vice president and chief financial officer of Marriott Corporation. He explained that the contemplated adjustments are expected to reduce Marriott International's projected pro forma earnings by approximately 7 cents a share in 1993, and less than 5 cents a share in 1994. On a pro forma basis, if the adjustments had been made at the beginning of 1993, Marriott International would have had about $900 million in long-term debt, including $205 million of liquid yield option notes (LYONs) and $200 million to fund the initial advance under the line of credit.
 Reflecting these refinements, on a pro forma basis, Marriott International's 1992 operating cash flow (before working capital changes, sales of timeshare notes, interest expense and taxes) exceeded $360 million. On the same basis, pro forma operating cash flow (before working capital changes, interest expense and taxes) for Host Marriott was approximately $325 million in 1992.
 Marriott Corporation said it would file shortly with the Securities and Exchange Commission preliminary proxy materials relating to the comeeting now is tentatively scheduled for June 22, 1993.
 -0- 3/11/93
 /CONTACT: Robert T. Souers of Marriott Corporation, 301-380-1339/
 (MHS)


CO: Marriott Corporation ST: District of Columbia IN: LEI SU:

KD-TW -- DC005 -- 5006 03/11/93 09:36 EST
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