Press Release: AFM Hospitality Corporation
April 15, 2002
TORONTO -- AFM Hospitality Corporation Friday announced that it has successfully completed the sale of the Royal
Connaught hotel in Hamilton, Ontario. Regulatory approval has been granted for this transaction, and all required
lender approvals obtained.
As previously announced in January 2002, this sale marks the completion of AFM's strategic decision started in
1997 to divest real estate in order to focus exclusively on hotel franchising, management and related services
as a relatively low risk, less capital-intensive business model. The first secured lender consented to the sale
with the terms of indebtedness continuing unamended. The second lender required a change in the terms of its indebtedness,
but none of which will cause any material impact on AFM.
The second lender is I.F. Propco Holdings (Ontario) 23 Ltd., a company controlled by the Canadian Commercial Workers
Industry Pension Plan ("CCWIPP"). Management has become aware that CCWIPP, through various entities,
controls more than 10% of AFM's outstanding voting securities. As such, CCWIPP and the entities its controls are
insiders of AFM. The restructuring of AFM's indebtedness immediately prior to the sale of the Hamilton hotel constituted
a related party transaction under applicable securities laws.
Pursuant to the agreed terms, an entity controlled by CCWIPP extended new financing in the principal amount of
$2.8 million to Kelloryn Hotels (Hamilton) Inc. ("KHHI"), the wholly owned subsidiary of AFM that owns
the Hamilton hotel asset. Such new debt has a term of 2 years and will bear 11% annual interest and will be renewable
for an additional year. KHHI transferred such funds to AFM, which paid down existing debt to the second lender.
Immediately following such transaction, the shares of KHHI were sold at the fair market value of $6 million as
previously announced. The effect of such transaction is that such new related party indebtedness was immediately
removed from AFM's consolidated balance sheet upon the sale of the Hamilton hotel. The purchaser agreed to such
financing terms. This debt restructuring will have no effect on AFM's business. AFM's press release of January
17, 2002 sets out further detailed information on the sale of the Hamilton hotel asset.
Completion of Private Placement
AFM is also announced the completion of private placements with parties that are not related to the company. Approved
by shareholders at AFM's special meeting of December 19, 2001, AFM issued a collective total of 15,263 units at
a subscription price of $4.75 per unit. Each such unit consists of one common share one warrant exercisable for
one common share within 5 years for an additional $4.75. The proceeds of such private placements are to be used
for general working capital requirements. The completion of these private placements will conclude the Share Purchase
Arrangement approved at the recent shareholders meeting.
About AFM Hospitality Corporation
Through its subsidiaries, AFM Hospitality Corporation, which also owns AFM Preferred Alliance Group Inc., AFM Asset
Management Inc., Northwest Lodging International (USA) Inc. and Northwest Lodging International (Canada) Inc.,
is the exclusive Canadian Master Franchiser for ASTON(R), Best Inns(R), Hawthorn(R) Suites, Howard Johnson(R),
Knights Inn(R), Park Plaza, Park Inn, Ramada(R), Villager(R) Lodge and La Quinta(R) Inns. AFM Hospitality Corporation
operates or has open and/or executed franchise and management agreements with more than 170 hotels in North America,
representing an inventory of nearly 20,000 hotel rooms. The company's primary focus is to increase the number of
hotels franchised by the respective brands, franchise new brands, build the portfolio of hotel management agreements,
and acquire other franchise businesses related to the hospitality industry, while making available property management
services. AFM Hospitality Corporation is a publicly traded company listed on the Toronto Stock Exchange (TSE:AFM).
AFM Hospitality Corporation system-wide sales for branded hotels in its franchise portfolio and properties operated
by the company exceed CDN$300 million per year. AFM Hospitality Corporation may be reached at www.afmcorp.com
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Contact:
Contact: Stephen Phillips
Company: AFM Hospitality Corporation
Title: Vice-Chairman, CEO
Voice: 416-202-6763
Email: sphillips@afmcorp.com
Contact: Lawrence P. Horwitz
Company: AFM Hospitality Corporation
Title: Chairman of the Board
Voice: 206-443-2570
Email: lhorwitz@afmcorp.com