Fitch Rates Starwood's $600MM Sr Notes Issue 'BBB-'

2008-05-16 22:30:54 -

- Fitch Ratings has assigned a 'BBB-' rating to Starwood Hotels & Resorts Worldwide Inc.'s (NYSE:HOT) 6.25% $200 million senior notes due 2013 and 6.75% $400 million senior notes due 2018. The Rating Outlook is Stable.

The notes rank equally with Starwood's other unsecured and unsubordinated debt. The proceeds from the offering will be used to reduce the balance on the company's revolving credit facility, thereby increasing its liquidity. As of March 31, 2008, Starwood had a $1.3 billion outstanding balance on its revolving credit facility and $4.1 billion of total debt outstanding. On April 11, Starwood converted $375 million of its revolver into a term loan. Therefore, pro forma for the term loan conversion and this issuance, Starwood reduced its revolving credit facility balance by $975 million to $325 million, which leaves an undrawn amount of $1.55 billion.

The ratings reflect Starwood's leading brands, quality assets, substantial product and geographic diversification, and its solid position in the timeshare business. The Stable Outlook reflects Fitch's view of an operating environment that is experiencing softening domestic demand due to the slowing U.S. economy. However, group business trends remain solid, supply growth remains muted, and the company will benefit from its international exposure given the weak U.S. dollar and stronger international demand (roughly 55% of Starwood's management and franchise fees are generated in markets outside the U.S).

Ratings continue to be constrained by share repurchase activity, which is likely to limit upside to the rating. Other credit concerns include the potential impact on demand from a deeper and more prolonged macroeconomic downturn than currently anticipated, the level of off-balance-sheet obligations and contingent commitments that could potentially increase as a result of the credit market disruption, event risk such as travel demand related shocks, and the potential for strategic acquisitions or other capital deployment decisions.

The 2013 and 2018 notes contain a change of control put at 101, as defined in the indenture. Therefore, the 2013 and 2018 notes can offer some protection in the event of a leveraged transaction.

Please refer to Fitch's 2008 Credit Analysis for additional detail on Starwood's credit, dated January 10, and available on the Fitch web site at www.fitchratings.com.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.

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