(The following statement was released by the rating agency)
NEW YORK, May 22 (Fitch) Fitch Ratings has assigned a 'BBB-'
rating to Wyndham's
proposed $1.5 billion unsecured revolving credit facility due
agreement will replace its existing $1 billion revolving credit
was set to expire in 2016.
The new agreement will have a consolidated leverage and interest
covenant of 4.0x and 2.5x, respectively, compared to the
leverage covenant of 3.75x and interest coverage covenant of
3.0x. In addition,
there is a carveout added to the new agreement that allows for
leverage to go to
5.0x for a material acquisition (defined as gross acquisitions
greater than $1
billion). All other terms of the agreement remain materially
The company will also increase its commercial paper program to
$750 million from
its previous program of $500 million. The company considers
borrowings under its commercial paper (CP) program to be a
reduction of the
available capacity of its revolving credit facility.
KEY RATING DRIVERS
The ratings reflect Wyndham's strong FCF profile, its focus on
asset-light/fee-driven business model, strong market position in
all of its
businesses, and management's public commitment to maintaining
Rating concerns include its high exposure to the more capital
timeshare industry, cyclicality in the lodging and timeshare
material working capital swings, and leverage being managed at
the high-end of
Fitch's target level for the given rating and business risks.
Wyndham's ample liquidity position is supported by $217 million
of cash, $1.3
billion of availability (pro forma capacity less CP and LOC as
of March 31,
2013) under its corporate revolving credit facility, and $525
availability under its two-year vacation ownership conduit
facility as of March
Wyndham has a sizable and well-established consumer financing
to its timeshare business. Term securitization transactions of
receivables provide an additional source of liquidity and recent
terms have been favorable. Market accessibility was better than
expectations through the recent recession, although transaction
terms were much
less favorable than the current financing environment.
The company's maturity schedule is favorable with no major
maturities coming due
over the next four years. The company had $202 million in CP
outstanding, as of
March 31, 2013.
The company generates strong FCF despite a negative drain on
from its timeshare contract receivables. Fitch calculates LTM
FCF of $696
million as of March 31, 2013.
--Fitch calculates core lease-adjusted leverage of 3.8x as of
March 31, 2013,
which is currently above Fitch's 3.25x target at the 'BBB-'
However, the company acknowledged that leverage was temporarily
over its stated
target (3.0x - 3.3x) on its recent earnings call and that it
would return to its
target range over the remainder of the year. If the company
manages leverage at
current levels for a sustained period of time then there could
pressure on the rating/Outlook.
--Wyndham's current FCF profile is very strong at its current
rating pressure could result if Fitch's outlook for development
spending and the
capital intensity of the company's businesses were to increase
significantly impacting its FCF generation.
--There could be positive ratings momentum if the company
reduced its leverage
and adopted more conservative financial policies. Fitch does not
expect this to
occur in the near term, but upward rating momentum could ensue
lease-adjusted leverage were reduced to around 2.75x while
maintaining a solid
FCF profile, and management instituted the policy to maintain
Fitch currently rates Wyndham as follows:
--Issuer Default Rating (IDR) 'BBB-';
--Short-term IDR 'F3';
--Commercial paper 'F3';
--$1.5 billion senior unsecured credit facility 'BBB-';
--Senior unsecured notes 'BBB-'.
Fitch Ratings, Inc.
New York, NY 10004
Michael Paladino, CFA
Michael Simonton, CFA
Media Relations: Brian Bertsch, New York, Tel: +1 212-908-0549,
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Inn the Footnotes: Comparison of Adjusted Credit Metrics and
for U.S. Lodging C-Corps' (Jan. 7, 2011);
--'2013 Outlook: Cross-Sector Lodging & Timeshare - The
Penthouse View' (Dec.
--'Corporate Rating Methodology' (Aug. 8, 2012);
--'Short-Term Ratings Criteria for Non-Financial Corporates'
(Aug. 8, 2012).
Applicable Criteria and Related Research:
Inn the Footnotes: Comparison of Adjusted Credit Metrics and
for U.S. Lodging C-Corps
2013 Outlook: Cross-Sector Lodging & Timeshare â€” The Penthouse
Corporate Rating Methodology
Short-Term Ratings Criteria for Non-Financial Corporates
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