S&P ups Starwood outlook to positive, places ITT notes on negative watch

Standard & Poor's said it revised its outlook on Starwood Hotels & Resorts Worldwide Inc. to positive from stable and affirmed the company's BB+ corporate credit and senior unsecured debt ratings.

The outlook revision follows the company's announcement it would sell 38 hotels totaling almost 19,000 rooms to Host Marriott Corp. (BB-/stable) for $4.1 billion.

In addition, S&P placed its BB ratings on Starwood subsidiary ITT Corp.'s $450 million senior notes and $150 million senior notes on CreditWatch with negative implications, reflecting the expectation that these obligations will be assumed by Host, a lower-rated entity.

Consideration for the purchase will be $2.3 billion in Host stock paid to Starwood's shareholders, almost $1.1 billion in cash and the assumption by Host of $700 million in Starwood's debt.

Cash proceeds received by Starwood from the Host transaction, expected near-term proceeds from additional asset sales of more than $300 million, along with about $900 million in unrestricted cash balances as of September, are expected to fund $450 million in near-term debt maturities and make share repurchases over the intermediate term under the company's $1.3 billion share repurchase authorization, the agency said.

Although Starwood's approximately $1.25 billion in EBITDA in the 12 months ended September 2005 is expected to decline by more than $315 million due to asset sales, the lodging environment is expected to remain strong over the near term, the agency said.

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