Highland Hospitality nears deal with creditors-WSJ

NEW YORK Thu Jan 20, 2011 7:20pm EST

NEW YORK Jan 20 (Reuters) - Highland Hospitality Corp, the hotel chain owned by real-estate mogul Joseph E. Robert Jr.'s investment firm, is nearing a deal to hand ownership to creditors led by Ashford Hospitality Trust Inc (AHT.N) and Prudential Financial Inc (PRU.N), the Wall Street Journal reported on Thursday.

The newspaper said the deal would restructure nearly $2 billion in debt and is expected to be done outside of bankruptcy court. It could eliminate more than $600 million in debt for Highland, which owns 28 upscale hotels ranging from the Ritz Carlton in Atlanta to the Hilton Boston Back Bay.

Citing people familiar with the matter, the Journal said talks are fluid and a deal is not expected before February. The negotiations have dragged on longer than expected and the deal could still fall apart, its sources said.

In August, Highland defaulted on $868 million in junior debt. Roberts, via his investment vehicle JER Partners, has been negotiating with different creditors in an attempt to salvage the company.

Now, the creditors, who include Ashford, Prudential and private-equity giant Blackstone Group LP (BX.N), have negotiated a broad deal that would keep Highland out of bankruptcy, slash about a third of outstanding debt and transfer ownership. Maturities for debt remaining on Highland's books will be extended by five years, the report said.

JER will likely be wiped out in the deal, the people familiar with the situation said, according to the Journal.

There was no immediate comment from JER, Ashland, Prudential or Blackstone in response to calls from Reuters. (Reporting by Steve James; editing by Andre Grenon)