S&P Global Ratings assigned a BB+ corporate credit rating to Wyndham Hotels & Resorts Inc., which is being spun off from Wyndham Worldwide Corp., and Moody's assigned it a Ba1 corporate family rating.
The outlook from both rating agencies is stable.
Wyndham Hotels plans a $750 million senior secured revolving credit facility, a $1.6 billion senior secured term loan and an issuance of $500 million worth of senior unsecured notes. The proceeds will be used to redeem the planned bridge financing that will be used to acquire La Quinta Holdings Inc.'s hotel franchising and management business, pay for transaction costs and add cash to the balance sheet. Wyndham Hotels parent Wyndham Worldwide agreed to acquire select-service hotelier La Quinta's businesses in January in a $1.95 billion cash deal.
S&P said the rating reflects the expectation that the hotel company will make opportunistic acquisitions as well as its high EBITDA margin and relatively low volatility as a hotel franchiser and manager. The rating agency also pointed out the company's position as one of the biggest hotel companies in the world, its good geographic diversity, large portfolio of recognizable brands and strong loyalty program.
The positive business factors are partially offset by the company's concentration in the economy segment, revenue concentration among its top three brands and its dependence on the cyclical lodging industry, S&P noted.
The stable outlook incorporates the expectation of a continued good operating performance and substantial cost synergies as it integrates with La Quinta over the next two years.
This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings, a separately managed division of S&P Global. Descriptions in this news article were not prepared by S&P Global Ratings. The original S&P Global Ratings documents referred to in this news brief can be found here.