This excerpt taken from the BEE 8-K filed Mar 29, 2007.
Chicago, ILMarch 28, 2007Strategic Hotels & Resorts, Inc. (NYSE: BEE) (Strategic or the Company), a real estate investment trust and sole managing member of Strategic Hotel Funding, L.L.C. (SH Funding) today announced that SH Funding has commenced a private offering, subject to market conditions, of $150 million aggregate principal amount of exchangeable senior notes due 2012. SH Funding intends to grant the initial purchasers an option to purchase up to an additional $30 million aggregate principal amount of notes within 30 days of the initial issuance of the notes. The notes will be unsecured obligations of SH Funding, and subject to certain designated events and other conditions, exchangeable into, at SH Fundings option, cash, Strategic common shares or a combination of cash and Strategic common shares. The interest rate, exchange rate and other terms of the notes will be determined by negotiations between SH Funding and the initial purchasers of the notes.
In connection with the offering, SH Funding and the Company, collectively, expect to enter into capped call transactions with one or more financial institutions that may be affiliates of the initial purchasers of the notes to substantially increase the effective exchange premium of the notes and to reduce the potential dilution to the Companys earnings per share upon future exchange of the notes. In connection with hedging the capped call transactions, the relevant financial institutions have advised SH Funding and the Company that they or their respective affiliates expect to purchase shares of the Companys common stock and/or enter into various derivative transactions with respect to the Companys common stock concurrently with or shortly after the pricing of the notes and may enter into or unwind various derivatives and/or purchase or sell the Companys common stock in secondary market transactions following the pricing of the notes (including during the observation period related to any exchange of the notes). These activities could have the effect of increasing, preventing or offsetting a decline in the price of the Companys common stock concurrently with or following the pricing of the notes.
In connection with this private offering, Strategic will repurchase up to $25,000,000 of its common shares in open market and/or private transactions.
Strategic intends to use the net proceeds from this private offering to pay the cost of the capped call transactions described above, repurchase its shares, repay amounts outstanding under its bank credit facility and for general corporate purposes.
The notes will be sold to qualified institutional buyers in reliance on Rule 144A under the Securities Act of 1933, as amended (the Securities Act). The notes and any Strategic common shares that may be delivered upon exchange of the notes have not been registered under the Securities Act or any state securities laws, and unless so registered, may not be offered or sold in the United States except pursuant to an exemption from the registration requirements of the Securities Act and applicable state laws. This press release shall not constitute an offer to sell or the solicitation of an offer to buy any of these securities, nor shall it constitute an offer, solicitation or sale in any jurisdiction in which such offer, solicitation or sale is unlawful.