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S&P places Aimbridge Acquisition on CreditWatch negative

S&P Global Ratings placed its ratings on Aimbridge Acquisition Co. Inc., including its B issuer credit rating, on CreditWatch with negative implications.

The placement follows the merger announcement of its subsidiary Aimbridge Hospitality LLC with Interstate Hotels & Resorts Inc. to build a third-party hotel management services company.

The ratings action reflects uncertainty about Aimbridge's pro forma capital structure and the possibility that it could have meaningfully higher adjusted leverage than Ratings' current forecast, which includes adjusted debt to EBITDA in the 7x area in 2019 and high-6x in 2020, excluding any impact of the proposed deal. Any potential incremental leverage could lead to higher leverage, which would amplify financial risk if the transaction happens just before or concurrent with a downturn in the lodging cycle, according to Ratings.

Furthermore, the company did not disclose the terms of the transaction, but Ratings believes it could be leveraging based on Aimbridge's history of debt-financed acquisitions. It also views the potential revenue per available room moderation and macroeconomic uncertainty in future quarters as key risk factors.

The rating agency said it intends to resolve the placements over the near-term after fully reviewing the transaction details, including the impact on the company's leverage, liquidity and business profile.

This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings. Descriptions in this news article were not prepared by S&P Global Ratings.