S&P Global Ratings affirmed Choice Hotels International Inc.'s corporate credit rating at BB+, with a stable outlook, following an announcement by the company that it agreed to acquire extended-stay lodging company WoodSpring Hotels' franchising operations for $231 million.
The rating agency said in a note that the rating affirmation, which comes despite the additional debt from the proposed acquisition, takes into account S&P's expectation for Choice Hotels to maintain lease-adjusted debt-to-EBITDA ratio in the low-3x area and funds from operations to debt in the high-teens percentage area through 2019.
S&P noted that its forecast for FFO to debt continues to be impacted by the substantial borrowings the company completed to pay its special dividend in 2012.
The stable outlook mirrors the company's adequate leverage capacity to accommodate the leveraging impact of the proposed acquisition.
S&P Global Ratings and S&P Global Market Intelligence are owned by S&P Global Inc.