S&P rates Hilton notes BB+

S&P said it assigned a BB+ rating and 4L recovery rating on co-borrowers Hilton Escrow Issuer LLC’s and Hilton Escrow Issuer Corp.'s proposed $1 billion of senior notes due 2024.

The co-borrowers will ultimately be merged into the surviving borrower entity: Hilton Domestic Operating Co. Inc.

The issuers are subsidiaries of Hilton Worldwide Holdings Inc.

The 4L recovery rating reflects 30% to 50% expected default recovery.

The proceeds will be used to repay a portion of debt of the company’s unrestricted U.S. real estate subsidiaries and fund other liabilities and expenses, S&P said.

The proceeds also will fund the transaction fees and expenses related to the planned spin-off of Hilton's owned real estate and timeshare operations, the agency said.

The company also expects to use proceeds to prepay a portion of the company's non-extended term loan under its credit facility due 2020, S&P said.

Cash distributions to Hilton from timeshare company Hilton Grand Vacations following the completion of planned future borrowings at that entity will partially offset the additional unsecured debt, the agency added.

Despite the additional unsecured debt in the capital structure, S&P said it believes that Hilton will utilize the receipt of funds from the spin-off and about $250 million in additional proceeds from the notes to prepay outstanding amounts under the non-extended term loan due 2020, leading to only a modest deterioration in recovery prospects for unsecured lenders as a result.

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