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Rating Action:

Moody's upgrades FelCor to B1; outlook stable

07 Sep 2017

New York, September 07, 2017 -- Moody's Investors Service ("Moody's") upgraded all ratings of FelCor Lodging Limited Partnership ("FelCor"), including its corporate family and senior unsecured ratings to B1 from B2. The outlook is stable. This rating action follows the closing of the merger of FelCor into RLJ Lodging Trust ("RLJ"), an unrated entity, on August 31, 2017. FelCor survives as a wholly-owned indirect subsidiary of RLJ, all outstanding debt instruments continue to be held at the subsidiary level.

The following ratings were upgraded:

FelCor Lodging Limited Partnership -- corporate family rating to B1 from B2; senior secured regular bond/debenture to Ba3 from B1; senior unsecured regular bond/debenture to B1 from B2.

The following ratings were withdrawn:

FelCor Lodging Trust Incorporated -- corporate family rating at B2; preferred stock at Caa1.

RATINGS RATIONALE

The rating upgrade reflects FelCor's improved credit and operating profile following the merger. Post merger Felcor's standalone credit metrics are expected to be stronger with effective leverage, operating leverage, fixed charge and an unencumbered assets at levels commensurate with a B1 senior unsecured debt rating. FelCor will also be now part of a meaningfully larger enterprise, leading it to realize greater economies of scale, which will drive operating cost benefits and lower its cost of capital. Moody's highlights that the merger of FelCor to RLJ creates a combined portfolio that includes 158 hotels in 26 states and the District of Columbia, diversified across Marriott, Hilton, Hyatt and Wyndham flags.

Moody's stated that future upward rating pressure on FelCor's ratings would be predicated on the entity's operating results, including a sound capital structure and modest overall leverage. A maintenance of Net Debt/EBITDA below 5.0x and fixed charge coverage approaching 3.5x as well as an improvement in liquidity position with a large unencumbered asset pool would also be a key component to a ratings upgrade.

A rating downgrade would likely reflect a shift in capital structure resulting in Net Debt/EBITDA above 6.0x and fixed charge coverage falling below 2.0x on a consistent basis. Downward ratings pressure would also emerge from a reduction of unencumbered assets at the standalone FelCor subsidiary.

Moody's last rating action with respect to FelCor was on April 25, 2017 when Moody's affirmed FelCor's B2 senior unsecured and corporate family ratings following the merger announcement with RLJ Lodging Trust. Concurrently, FelCor's rating outlook was revised to positive from stable.

FelCor Lodging Limited Partnership is a real estate investment trust headquartered in Irving, TX. It is a wholly-owned indirect subsidiary of RLJ Lodging Trust [NYSE: RLJ]. FelCor owns interests in 37 properties located in major and resort markets throughout the U.S. FelCor partners with leading hotel companies to operate its hotels, which are flagged under well-known brands and premier independent hotels. At June 30, 2017, FelCor reported total assets of $1.7B and total equity of $169M.

The principal methodology used in these ratings was Global Rating Methodology for REITs and Other Commercial Property Firms published in July 2010. 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 or category/class of debt, this announcement provides certain 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 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.

Thuy Nguyen
Vice President - Senior Analyst
Commercial Real Estate 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

Nick Levidy
MD - Structured Finance
Commercial Real Estate 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

No Related Data.
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