Fitch lifts Starwood from junk

Fitch Ratings said it upgraded Starwood Hotels & Resorts Worldwide Inc.'s issuer default rating bank credit facility and senior unsecured notes to BBB- from BB+.

The outlook was revised to stable from positive because, in Fitch's view, the likelihood for significant continued share repurchase activity and the potential for strategic acquisitions are likely to limit further upside to Starwood's credit ratings over the next 12 months.

The agency said the upgrade is based on the company's continued execution on its plan to sell assets in order to improve its balance sheet, its business mix reorganization and the continued strength of lodging fundamentals. The new ratings reflect Starwood's leading brands, high quality assets, substantial product and geographic diversification and its solid position in the timeshare business.

Potential credit quality deterioration could come from capital deployment decisions, such as a higher-than-expected level of share repurchase or a heavily debt-financed acquisition, and contingent commitments such as loans and equity contributions to partners, third-party guarantees and potential timeshare commitments. However, Fitch said it believes Starwood's investment-grade profile with its improved balance sheet and increased financial flexibility mitigates these concerns and allows for some flexibility in credit metrics.

Lease-adjusted debt to EBITDAR was 2.8x at June 30.

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