Marriott Sued by Investors Over Restructuring Plans
BALTIMORE — A group of Marriott Corp. bondholders sued the food and lodging company Thursday, claiming that it defrauded them with a proposed restructuring plan that hurt the value of their investment.
The civil securities fraud suit, filed in federal district court in Baltimore, alleged that Marriott failed to disclose the restructuring plan when it issued $400 million in bonds in April and May.
“The issue is that the company failed to disclose this information at the time they issued these securities,†said F. John Stark III, senior vice president of PPM America Inc. in Chicago, one of six bondholders that sued.
Marriott, which carries $2.9 billion in long-term debt, said on Oct. 5 that it planned to split the company in two. Real estate operations would become a separate debt-laden business called Host Marriott Corp.
Most of the old company’s revenue would go to Marriott International Inc., which would manage the vast hotel chain.
After the announcement, Moody’s Investors Service Inc. downgraded the Marriott bonds to below investment-grade status.
The bondholders claim the value of the bonds fell $120 million because of the reorganization announcement.
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