Research Update: Hyatt Hotels Corp. Ratings Placed On CreditWatch Negative On Leveraging ALG Acquisition; One-Notch Downgrade Likely

Hyatt Hotels Corp. announced its plan to acquire Apple Leisure Group (ALG) for a purchase price of $2.7 billion, including the repayment of ALG's debt. Hyatt has obtained committed bridge financing through a senior unsecured term loan, and also plans to issue $500 million of equity and use $1 billion in cash on-hand to finance the acquisition. Hyatt also announced a new $2 billion asset sale program over the next three years, which it plans to use to repay debt. While Hyatt can use the planned incremental asset sale and equity proceeds to reduce leverage over time, we believe the company will likely fund the acquisition with enough debt to cause our measure of Hyatt's pro forma net leverage to

...- Hyatt Hotels Corp. announced its plan to acquire Apple Leisure Group (ALG) for a purchase price of $2.7 billion, including the repayment of ALG's debt. Hyatt has obtained committed bridge financing through a senior unsecured term loan, and also plans to issue $500 million of equity and use $1 billion in cash on-hand to finance the acquisition. Hyatt also announced a new $2 billion asset sale program over the next three years, which it plans to use to repay debt. - While Hyatt can use the planned incremental asset sale and equity proceeds to reduce leverage over time, we believe the company will likely fund the acquisition with enough debt to cause our measure of Hyatt's pro forma net leverage to be above our 3.75x downgrade threshold at the current '###-' rating through 2022. - We placed all ratings on CreditWatch with negative implications to reflect the likelihood of a downgrade. - In resolving the CreditWatch listing, we plan to assess the effect that Hyatt's acquisition financing...

Research Update