Research Update: Ratings On Lodging Group Accor Affirmed At 'BBB-' Despite Temporary Spike In Leverage; Outlook Stable

Despite a solid operating performance, Accor's adjusted leverage increased to 3.5x in 2018, mostly on significant transactions at year-end including increasing its Orbis shareholding and committing to the second tranche of the share buyback program, while the closing of these transactions will be in 2019. Accor also announced a four-year €225 million investment in marketing and its loyalty program. Combined with restructuring and integration costs, we expect this will depress EBITDA in 2019, leading to estimated adjusted leverage of around 2.8x--within our rating thresholds. Accor continues to implement its strategy to become a pure asset-light hotel operator by disposing of owned and leased hotel assets. It plans to dispose of Orbis, Mantra, and Mövenpick over the next two years. We

...+ Despite a solid operating performance, Accor's adjusted leverage increased to 3.5x in 2018, mostly on significant transactions at year-end including increasing its Orbis shareholding and committing to the second tranche of the share buyback program, while the closing of these transactions will be in 2019. + Accor also announced a four-year 225 million investment in marketing and its loyalty program. Combined with restructuring and integration costs, we expect this will depress EBITDA in 2019, leading to estimated adjusted leverage of around 2.8x--within our rating thresholds. + Accor continues to implement its strategy to become a pure asset-light hotel operator by disposing of owned and leased hotel assets. It plans to dispose of Orbis, Mantra, and M÷venpick over the next two years. + We are affirming our '###-/A-3' issuer credit ratings on Accor and our '###-' senior unsecured issue rating and '##' junior subordinated debt issue rating. + The stable outlook reflects our expectation...

Research Update