S&P revises La Quinta outlook to stable

Standard & Poor's said it revised its outlook on La Quinta Corp. to stable from negative and its related La Quinta Properties Inc. and Meditrust Exercisable Put Options Securities Trust. At the same time, S&P affirmed its ratings, including its BB- corporate credit ratings, on the company and its affiliates.

S&P said the outlook revision reflects La Quinta's increased financial flexibility following its common equity offering on Nov. 20, resulting in gross proceeds of about $167 million, and the closing earlier this month of a new $150 million revolving credit facility.

In addition, the company's recent operating performance has improved. The net proceeds from the stock sale will be used for potential acquisitions of lodging properties and/or brands, debt reduction, and/or redemption of preferred stock.

S&P said the ratings on La Quinta reflect the company's significant debt levels and its dependence on a single mid-scale, limited service lodging brand that has not yet achieved strong national recognition. These factors are partially mitigated by the somewhat less revenue volatility for mid-scale and lower-priced brands during the recent downturn (reduced reliance on business travelers) and improved liquidity.

Total operating lease-adjusted debt (net of investment in securities) to EBITDA for the 12 months ended September 2003 was in the low-5x area and EBITDA to interest was in the mid-2x area.

S&P said that if La Quinta uses its excess cash to repay 2004 maturities, leverage could improve to the low-4x area by late 2004. This assumes that a majority of equity proceeds will be used for acquisitions rather than debt repayment.

The stable outlook reflects La Quinta's solid liquidity and improving operating performance, as well as the expectation that the company's overall financial profile will strengthen in the intermediate term. S&P said it believes that the lodging industry is at or near the bottom of the cycle, and anticipates a gradual recovery throughout 2004.

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