S&P puts Hilton Grand on watch

S&P said it placed all its ratings on Hilton Grand Vacations Inc., including the BB issue ratings, on CreditWatch with negative implications.

The placement follows Hilton reporting plans to acquire Diamond Resorts International Inc. Hilton plans to finance the deal with equity and partially refinance and partially assume Diamond’s debt.

“S&P Global Ratings expects the pro forma entity to have total corporate debt of about $2.9 billion at transaction closing, inclusive of debt issuances and assumed debt from existing entities and excluding non-recourse securitization debt at both entities. Using our measure of 2019 captive-adjusted EBITDA for both companies, we believe pro forma captive-adjusted debt to EBITDA would be above 5x, and that leverage would be significantly higher in 2021 and 2022 because of the pandemic's negative effect on the combined company,” the agency said in a press release.

S&P said it aims to resolve the placement over the next few months after reviewing disclosures, financing terms, updating its leverage forecast and assess business risks among other factors.

“We believe HGV's issuer credit rating could be lowered by one or more notches due to incremental leverage from the proposed acquisition,” the agency said.

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