S&P rates Hilton Grand loan BB+

S&P said it rated Hilton Grand Vacations Inc.’s planned $900 million incremental term loan BB+ with a 2 recovery rating. The 2 recovery rating indicates substantial (70%-90%; rounded estimate: 70%) recovery for senior secured lenders in a hypothetical default. The agency also lowered the rating on the company’s secured debt to BB+ from BBB- and the recovery rating to 2 from 1.

Concurrently, S&P affirmed HGV’s BB issuer rating and removed it from CreditWatch where it had been placed on Nov. 6 with negative implications.

HGV intends to borrow the loan and issue $900 million in other secured debt to complete its purchase of Bluegreen Vacations Holding Corp. The added debt led to the downgrade, S&P said.

“We expect that the incremental debt to acquire Bluegreen will increase S&P Global Ratings-adjusted leverage by approximately 2x to approximately 5x-5.5x pro forma for the close of the debt financing in the first half of 2024, from the low-3x area we had forecast for HGV on a stand-alone basis.

“Nonetheless, we believe that HGV will achieve sufficient growth in vacation ownership interest (VOI) sales, revenue, and EBITDA, as well as achieve a modest amount of synergies over the next couple of years, which will result in leverage that is approximately 4.5x-5x in 2024 and below our 4.5x downgrade threshold by early 2025,” S&P said in a statement.

The outlook is stable.

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