S&P rates Host Hotels notes BBB-

S&P said it assigned its BBB- issue-level rating and 1 recovery rating to Host Hotels & Resorts Inc.'s subsidiary Host Hotels & Resorts LP's proposed $350 million series G senior currently unsecured notes due 2024.

The 1 recovery rating indicates an expectation for very high (90% to 100%; rounded estimate 95%) recovery for lenders in the event of a payment default.

The issue-level rating is BBB-, one notch above the corporate credit rating, despite the 1 recovery rating because the agency caps the issue ratings for speculative-grade issuers at BBB-, regardless of the recovery rating.

Proceeds will be used to repay a portion of its borrowings under the company’s revolving credit facility and for general corporate purposes.

“The proposed senior notes and the company's existing senior notes and debenture indentures are currently unsecured because they have released former subsidiary guarantees and stock pledges under provisions in the indentures that require the same guarantees and collateral provided to the revolving credit facility,” S&P said in a news release.

“Effectively, the existing senior notes are currently unsecured.

“However, if Host's leverage ratio exceeds 6x for two consecutive fiscal quarters at a time when Host does not carry an investment-grade, long-term unsecured debt rating, the subsidiary guarantees and equity pledges will spring back into place in Host's revolver and note indentures. Our simulated default scenario for Host incorporates the assumption that the company's leverage ratio will be above 6x, and the notes would be secured at that time,” S&P added in the release.

The 1 recovery rating and BBB- issue-level ratings on Host's existing credit facilities and senior notes are unchanged because the incremental debt in the capital structure is modest and does not meaningfully impair recovery prospects for lenders, S&P explained.

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