S&P rates Marriott Vacations convertible BB+, unit’s loan BBB-

S&P said assigned its BB+ issue-level and 4 recovery ratings to Marriott Vacations Worldwide's convertible senior unsecured notes due in 2022. The 4 recovery rating indicates average (30%-50%; rounded estimate: 40%) recovery for noteholders in the event of a default.

At the same time, S&P assigned a BBB- issue-level and 1 recovery ratings to the company's existing $250 million corporate revolver due in 2022, issued by subsidiary Marriott Ownership Resorts Inc. The 1 recovery rating indicates very high (90%-100%; rounded estimate: 95%) recovery for lenders in the event of a default.

The BBB- issue-level rating is one notch above the corporate credit rating despite the 1 recovery rating, because S&P generally caps most debt issued by speculative-grade entities at BBB-, regardless of recovery rating.

S&P said it also affirmed its BB+ corporate credit rating and stable outlook on Marriott Vacations Worldwide.

“The corporate credit rating affirmation and stable outlook reflects our view that MVW has sufficient leverage capacity at its current ratings level to accommodate the impact of the convertible notes issuance,” S&P said in a news release.

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