Fitch Ratings upgraded NH Hotel Group SA's long-term issuer default rating to B+ from B.
The outlook is positive.
Fitch also upgraded the hotel operator's senior secured rating to BB with Recovery Rating RR2 from BB with Recovery Rating RR2.
The upgrade echoes a significant enhancement in the company's operating performance and leverage metrics. The improvement CapEx plan deployed since 2015, tied with a more organized cost structure and effective pricing mechanism, has allowed the company to reposition its offer along a more upscale segment, decrease costs and increase profit margin.
The company has also managed to decrease its gross debt levels, the rating agency added.
The positive outlook mirrors the rating agency's anticipation of additional profitability and free cash flow improvements over the next two years, along with scope for additional deleveraging towards the BB area.
Fitch said the conversion of NH's €250 million convertible bond by 2018-end would improve the group's capital structure. However, in case NH elects to allocate its operating cash flow generation to larger capex, mergers and acquisitions or shareholder returns, the rating would likely remain at B+, Fitch added.