Moody's on July 26 assigned first-time ratings to Marriott Ownership Resorts Inc., a subsidiary of Marriott Vacations Worldwide Corp. that operates timeshare rentals.
The rating agency's move follows Marriott Vacations' agreement to acquire all shares of Miami-based vacation services provider Interval Leisure Group.
Marriott Ownership was assigned a Ba2 corporate family rating, a Ba2-PD probability of default rating, a Baa3 senior secured bank facility rating, a Ba3 senior unsecured note rating, and an SGL-2 speculative grade liquidity rating, with a stable outlook.
Moody's also cited Marriott Ownership's combined portfolio of "quality brands" and its status as the second-largest timeshare company in terms of revenue and owner numbers, in addition to the stability of its timeshare exchange business.
The agency said the stable outlook reflects its view that parent Marriott Vacations will apply excess free cash flow to achieve and maintain leverage of about 5.0x. It added that the ratings could be upgraded if Marriott Vacations is able to improve leverage to about 3.5x and EBITA/interest coverage above 5.0x, while a downgrade could result if debt/EBITDA does not migrate toward 5.0x or EBITA/interest does not approach 3.5x.