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Ratings Actions & Outlooks
November 1, 2008
S&P Puts Starwood Hotels On Creditwatch With Negative Implications
Standard & Poor's placed its ratings on White Plains, N.Y.-based Starwood Hotels & Resorts Worldwide on CreditWatch with negative implications.
The rating agency said the CreditWatch listing reflects credit measures that are already somewhat weak for the current rating at a time when there are increasing concerns about the global lodging operating environment.
Starwood's leverage, measured as adjusted total debt to EBITDA, was 3.75 times for the 12 months ended Sept. 30, 2008, a level that is at the top of the range S&P has cited as being in line with the current investment-grade rating.
"Recent news about the economy suggests that 2009 lodging operating performance in the U.S. will be worse than our previous expectation that the industry would experience a revenue per available room [RevPAR] decline of about 5% or more next year," according to S&P.
"In addition, we are concerned that current economic challenges in Europe and other international markets will lead to lower worldwide RevPAR performance for Starwood than we had previously anticipated," according to S&P.
Moody's Downgrades CIFG
Moody's downgraded the insurance financial strength ratings of CIFG Guaranty, CIFG Europe, and CIFG Assurance North America, Inc. to B3 from Ba2.
The rating agency said it continues a ratings review with direction uncertain.
Moody's said the rating actions reflect its expectation of substantially higher mortgage-related losses arising from CIFG's insured portfolio, as well as the possibility that certain troubled exposures could be commuted.
CIFG and its parents have entered into a nonbinding memorandum of understanding with approximately 75% of CIFG's CDS counterparties regarding the commutation of approximately $12 billion of ABS CDOs and certain CRE CDOs. The financial guarantor indicated that it expects the contemplated commutation transaction to close before the end of 2008.
Separately, CIFG has also reached a definitive agreement to reinsure approximately $13 billion of US municipal risks with Assured Guaranty. The deal is still subject to some closing conditions.
Moody's said that if CIFG is able to reach a favorable settlement and complete the announced transactions, remaining CIFG policyholders would likely benefit from an improved credit profile at the company. CIFG's insurance financial strength rating remains on review with direction uncertain to reflect the wide range of potential outcomes resulting from the firm's restructuring initiatives.
Established in 2001, CIFG has provided financial guarantees to issuers in the municipal and structured finance markets in the US and Europe through CIFG Assurance North America, Inc. and CIFG Europe, though it ceased writing business earlier this year to conserve capital and to evaluate its strategic alternatives.
Horizon Lines Cut By Moody's
Moody's downgraded the debt ratings of Horizon Lines and changed its outlook on the shipping business to negative from stable.
The downgrades were prompted by 2008 operating results that continue to trail expectations, both from the time of Horizon's August 2007 refinancing and from the company's 2008 quarterly earnings calls.
"Moody's also believes that there are few catalysts to spark a positive inflection of demand in 2009, particularly in Horizon's Hawaii and Puerto Rico markets. This could sustain pressure on margins and operating cash flow and slow the pace of the planned de-levering of the capital structure," the rating agency warned.
The negative outlook reflects the potential for payments related to the settlements of the ongoing Department of Justice investigation of price fixing in the Puerto Rico trade or to the class action lawsuits filed subsequent to the announcement of the DOJ investigation to consume funds and weaken Horizon's current good liquidity position.
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