Fitch Ratings said it will continue to place the BBB- long-term and F3 short-term issuer default ratings and senior unsecured debt ratings of hotelier Wyndham Worldwide Corp. on Rating Watch Negative.
The negative watch is being maintained on the back of Wyndham's planned spin-off of its lodging business and sale of its European vacation rentals segment, which the rating agency expects will cause Wyndham Destinations' operational focus to be constricted to the "less stable and more capital intensive" timeshare business, Wyndham Vacation Ownership.
Fitch listed further transaction certainty, Wyndham Destinations' financial policy targets and the time frame for achieving them as key unknown factors that will influence the resolution of the negative rating watch.
Wyndham Worldwide's ratings could fall to the mid-to-low BB category if Wyndham Destinations' core, adjusted gross leverage is roughly 2x to 3x, according to the rating agency, adding it anticipates the unit's "core" adjusted leverage to increase to 6.4x at spin and to the high 5.0x range at 2018-end.
The ratings mirror the Parsippany, N.J.-based company's adequate free cash flow profile, as well as its focus on maintaining low investment-grade credit metrics.