Analysis of Marriott Corporation’s ‘Project Chariot’

Introduction
In the spring of 1992, J.W. Marriott Jr., Marriott Corporation’s Chairman and CEO, must decide whether to recommend a proposal to the Board of Directors for a complete restructuring of the firm due to financial distress and a hefty current debt burden. While restructuring seems promising to executives, there are serious ethical considerations at hand regarding the fiduciary duty of management to both shareholders and debtholders. In theory, Project Chariot is a leveraged buyout that would diminish the value of Marriott’s current debt and distribute it to existing shareholders who may realize capital gains from stock appreciation. Our analysts hypothesize that CFO Stephen Bollenbach’s proposal, Project Chariot, will ultimately satisfy its outstanding debt payments to creditors in the long term despite an imminent credit downgrade, and more than anything leave shareholders extremely pleased.
Project Chariot: A Brief Overview
Stephen Bollenbach is proposing Project Chariot in an effort to combat the problems causing Marriott Corporation (MC) severe financial distress. The most immediate problem to fix is MC’s debt issue. Economic downturns in the 80s and the 1990 crash of the real estate market have left MC with debt issues that have weighed heavily on the company. Once the debt issues are resolved, Marriott Corporation will be able to raise capital. The new company will have the ability to take advantage of investment opportunities to which a non-restructured MC would not have access. As far as the plan itself, Project Chariot proposes to split MC into two companies; Marriott International, Inc. (MII) would revolve around lodging, food and facilities management businesses, and life-care facilities, and Host Marriott Corporation (HMC) would deal with MC’s real estate holdings and other properties