Approximately $2.0 billion of rated debt affected.
New York, February 27, 2012 -- Moody's Investors Service today assigned a Baa3 rating to Wyndham Worldwide
Corporation's ("Wyndham's") proposed $600 million five and ten
year senior unsecured notes that could be upsized. Wyndham's existing
Baa3 senior unsecured ratings were affirmed. The rating outlook
is stable. The net proceeds of the notes will used to fund the
repurchase of the company's existing $250 million,
9.875% notes due 2014, and the partial repurchase
of its $800 million 6% notes due 2016 and its $250
million 7.375% notes due 2020, repay borrowings under
its revolving credit facility, and general corporate purposes.
Ratings assigned:
Proposed $800 million senior unsecured 5 & 10 year notes at
Baa3
Senior unsecured and preferred debt shelf at (P) Baa3 and (P) Ba2,
respectively
Ratings affirmed:
Senior unsecured notes at Baa3
RATINGS RATIONALE
Wyndham's Baa3 ratings consider that despite a $150 million increase
in total debt, the proposed transaction will extend debt maturities
and lower the company's overall interest costs. Additionally,
Moody's expects the increase in total debt resulting from transaction
will be absorbed by rising earnings over the next year, and as a
result, retained cash flow to net debt will remain at about 24%.
The ratings continue to reflect Wyndham's leading market position in each
of its three business segments, the high margins and low capital
intensity of its fee for service hotel franchise and vacation exchange
and rentals segments that comprise around 50% of adjusted EBITDA.
The lower business risk profile of these segments, help mitigate
the higher risk profile of the timeshare development and finance segment.
The ratings consider our view that travel demand will push revenues (17%
of total) and EBITDA (22% of total) of the lodging segment up over
the next twelve months. The ratings also reflect the company's
ability to generate a high level of free cash flow that can support its
shareholder friendly financial policies, it's very good liquidity
profile, and Moody's expectation the company will manage its balance
sheet in a manner that preserves credit metrics near current levels.
Key credit concerns include an anemic macro-economic environment
-- particularly in Europe that could hurt earnings growth of vacation
rentals (17% of revenues), and sluggish growth in timeshare
development which may continue to limit growth in new exchange members
(16% of revenues). Collectively, Vacation Exchange
and Rentals comprise 36% of adjusted EBITDA. Additional
credit concerns include a financial policy that is moderately aggressive,
timeshare business risks - including high default rates associated
with timeshare consumer receivables, and a reliance on the securitization
market to recycle consumer receivables so that capital can be made available
for other corporate objectives, including returns to shareholders.
The rating outlook is stable reflecting our view that EBITDA growth in
the lodging segment will offset sluggish EBITDA growth in Vacation Exchange
and Rental and Vacation Ownership segments as well as our expectations
the company will manage its cash flow and balance sheet to maintain credit
metrics near current levels, will continue to manage the timeshare
business for cash, and will support its share repurchase program
largely from free cash flow. The stable outlook incorporates tolerance
for a modest level of acquisition activity.
Wyndham's ratings could be upgraded if retained cash flow to net debt
exceeds 30% and can be sustained at this higher level, the
company continues to effectively manage its timeshare business for cash,
and support its share repurchases largely from cash flow.
Ratings could be downgraded if Wyndham's stated debt to EBITDA financial
policy target becomes more aggressive, it's retained cash flow to
net debt drops below 15%, or if the company does not maintain
sufficient liquidity to support its corporate spending objectives.
The principal methodology used in rating Wyndham Worldwide Corporation
was the Global Lodging & Cruise Industry Rating Methodology published
in December 2010. Please see the Credit policy page on www.moodys.com
for a copy of these methodologies.
Wyndham Worldwide Corporation (Wyndham) is one of the largest hotel franchisors
in the world and operates in three segments of the hospitality industry:
lodging, vacation exchange and rentals, and vacation ownership.
The company also develops and sells vacation ownership (timeshare) intervals
to individual consumers and provides consumer financing in connection
with these sales. Wyndham generates annual revenues of about $4.2
billion.
REGULATORY DISCLOSURES
Although this credit rating has been issued in a non-EU country
which has not been recognized as endorsable at this date, this credit
rating is deemed "EU qualified by extension" and may still
be used by financial institutions for regulatory purposes until 30 April
2012. Further information on the EU endorsement status and on the
Moody's office that has issued a particular Credit Rating is available
on www.moodys.com.
For ratings issued on a program, series or category/class of debt,
this announcement provides relevant regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides relevant regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides relevant regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
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Information sources used to prepare the rating are the following:
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Investors Service information.
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for information on (A) MCO's major shareholders (above 5%) and
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Peggy Holloway
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Kendra M. Smith
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's assigns a Baa3 rating to Wyndham's $800 million sr unsecured notes; outlook stable
