When one of the world's leading owner and operator of hotels agrees to merge with one of the premier developers and managers of upscale vacation ownership resorts, can new financing initiatives be far behind?

Starwood Hotels & Resorts Worldwide Inc. and Vistana Inc. have announced a definitive agreement to merge, with Vistana becoming a wholly owned subsidiary of Starwood.

Vistana brings to the hotel chain its expertise in time-share development, a sector of the lodging industry Starwood has not exploited. The transaction also holds out the prospect of further growth in securitization of liens on vacation ownership intervals if Vistana succeeds in bringing its program to some of the 700 hotels worldwide that are owned or operated by Starwood. Vistana operates 10 resorts with over 2,200 units and has three more resorts opening soon.

The merger comes as Vistana completes an $80 million privately placed securitization of time-share cash flows through Dresdner Kleinwort Benson. The three-tranche deal is secured by approximately $86.4 million in first-mortgage liens on vacation ownership at its resorts.

The deal, Timeshare Mortgage Backed Bonds Series 1999-A featured $44 million of 6.8%, triple-A-rated paper; $28.8 million of 7.19% notes rated single-A and $7.5 million of 8.15% notes rated triple-B by Duff & Phelps Credit Rating Co.

With the just completed ABS placement, Vistana said it had completed securitizations on its own properties for the time being. However, it is not eliminating the possibility of doing something in the fourth quarter.

The immediate task, though, a company official said, is to get the Starwood merger closed.

Starwood - through its St. Regis/Luxury, Westin, Sheraton, Four Points and W subsidiaries - operates in 72 countries. The company's Starwood Financial unit is a leading publicly traded finance company that operates as a real estate investment trust and focuses exclusively on the commercial real estate industry providing specialized mortgage, mezzanine and lease financing through its proprietary origination, acquisition and servicing platforms.

The company completed a $541 million commercial mortgage-backed securitization of hotel properties in March this year.

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