Moody's rates La Quinta loans B1

Moody's Investors Service said it assigned a B1 corporate family rating, a B1-PD probability of default rating and an SGL-1 speculative grade liquidity rating to La Quinta Intermediate Holdings LLC, a wholly owned subsidiary of La Quinta Holdings, Inc., and B1 (LGD4, 51%) ratings to its $2.1 billion senior secured guaranteed seven-year term loan and $250 million senior secured guaranteed five-year revolving credit facility. The outlook is stable.

The closing of the bank facilities are subject to the completion of the proposed initial public offering by La Quinta Holdings, which will use proceeds of the IPO to repay and refinance existing debt.

The agency said the B1 corporate family rating reflects La Quinta's high leverage, small scale in terms of the number of system-wide rooms and significant geographic concentration in three states that account for about 43% of the company's hotel rooms.

The ratings take into account La Quinta's solid operating margins (in the high teens) that reflect the lower-cost structure of its limited service hotels and its growing franchise-based business model, Moody's said.

Moody's estimates that the pro forma ratio of adjusted debt to EBITDA was 6.2x as of the end of 2013.

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