S&P Global Ratings placed Wyndham Worldwide Corp.'s ratings on CreditWatch with negative implications, following the company's announcement that it plans to spin off its lodging franchise business and explore strategic alternatives for its European vacation rental business.
The ratings affected are the company's BBB- corporate credit and senior unsecured ratings, and its A-3 commercial paper rating.
S&P said it believes Wyndham will likely face incremental business risks from what it said is a "capital-intensive and volatile" timeshare business after the spinoff.
"The lodging franchise and vacation rental businesses have low capital intensity fee-for-service business models that tend to exhibit lower cash flow volatility over the economic cycle, and their separation would contribute to increased risk at new Wyndham," S&P said in a release.
The rating agency also credited the negative CreditWatch placement to uncertainty surrounding the capital structure at Wyndham post-spinoff, pro forma for the transactions, and any leverage policy commitment it may implement.
S&P said it will resolve the negative CreditWatch placement after a review of business risks, the future capital structure and any leverage policy commitment at Wyndham after the spinoff. It added that the placement will likely be resolved after Wyndham's strategic review of its European rental business.
S&P Global Ratings and S&P Global Market Intelligence are owned by S&P Global Inc.