New York, October 08, 2019 -- Moody's Investors Service ("Moody's") affirmed
Aimbridge Hospitality Holdings, LLC's ("Aimbridge")
B2 Corporate Family Rating, B2-PD Probability of Default
Rating, and its B1 senior secured rating (including the planned
$400 million add-on). The outlook is stable.
All ratings are subject to final review of documentation.
"The affirmation reflects Moody's view that the benefits of
the Interstate Hotels & Resorts, Inc. acquisition,
including improved scale with almost 60% more rooms under management
contracts and almost double the absolute level of EBITDA, will enable
the company to achieve and maintain leverage below 6.0x over the
next 12 to 18 months," stated Pete Trombetta, Moody's
lodging analyst.
Aimbridge announced in August that it was acquiring Interstate Hotels
& Resorts, Inc. the second largest third party hotel
management company, for about $800 million, including
fess and expenses. The acquisition will be funded with a proposed
$400 million add-on to its existing first lien term loan,
a $100 million second lien term loan, and a $300 million
equity contribution from Advent International Corporation. At the
same time, Aimbridge plans to raise a $60 million add-on
to its existing $60 million first lien revolving credit facility.
Affirmations:
..Issuer: Aimbridge Hospitality Holdings, LLC
.... Probability of Default Rating,
Affirmed B2-PD
.... Corporate Family Rating, Affirmed
B2
....Gtd. Senior Secured 1st Lien Revolving
Credit Facility, Affirmed B1 (LGD3)
....Gtd. Senior Secured 1st Lien Term
Loan, Affirmed B1 (LGD3)
Outlook Actions:
..Issuer: Aimbridge Hospitality Holdings, LLC
....Outlook, Remains Stable
RATINGS RATIONALE
Aimbridge's credit profile reflects Moody's expectation that
Aimbridge will successfully integrate the Interstate acquisition and lower
debt/EBITDA to below 6.0x within 12 to 18 months of the close of
the transaction. It also benefits from its position as the largest
third-party hotel management company with good diversification
in terms of geography, brands, and hotel owners. Assuming
the proposed transaction closes as expected, the acquisition of
Interstate will further improve the company's scale in terms of
number of managed properties (to about 1,315 properties from about
830) and almost doubles Aimbridge's absolute level of EBITDA.
The combined company will benefit from strong free cash flow due in part
to its minimal capital expenditure requirements. The combined company
is constrained by its high leverage. Debt/EBITDA is expected to
approximate 6.4x at the end of 2020, the first full year
of combined operations (all metrics include Moody's standard adjustments).
This amount of leverage is considered high given Aimbridge's small
scale in terms of revenue and earnings relative to other B2 rated Business
and Consumer Services companies.
The stable rating outlook reflects Moody's expectation that the
integration of Interstate's operations will be successful and the
company will achieve and maintain leverage below 6.0x over the
next 18 months.
Ratings could be upgraded if debt/EBITDA approaches 4.5x and EBITA/interest
expense improves to close to 3.0x. Ratings could be downgraded
if debt/EBITDA is sustained above 6.0x or EBITA/interest coverage
drops below 1.5x. Any deterioration in liquidity could also
lead to a rating downgrade.
Pro forma for the Interstate acquisition, Aimbridge Acquisition
Co., Inc., through its subsidiaries Aimbridge
Hospitality Holdings, LLC and KIHR Holdings, Inc.,
is the largest third-party hotel operator, with over 1,300
properties and approximately 185,000 rooms under management.
Aimbridge's managed properties are located in 49 states and 20 countries.
The company is majority owned by Advent International. The company
is private and does not file public financials. Pro forma revenues,
net of reimbursements, is approximately $300 million.
The principal methodology used in these ratings was Business and Consumer
Service Industry published in October 2016. Please see the Rating
Methodologies page on www.moodys.com for a copy of this
methodology.
REGULATORY DISCLOSURES
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security 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 certain
regulatory disclosures in relation to the credit rating action on the
support provider and in relation to each particular credit rating action
for securities that derive their credit ratings from the support provider's
credit rating. For provisional ratings, this announcement
provides certain 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 ratings
tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Peter Trombetta
Asst Vice President - Analyst
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Janice Hofferber, CFA
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653