Company Press Release
January 4, 2000
NEW YORK, NY -- Fitch IBCA upgrades its ratings to 'BB+' from `BB' for Starwood Hotels & Resorts Worldwide,
Inc. (HOT) and ITT Corp. (listed below) and removed them from RatingAlert-Positive following the closing of the
sale of Ceasars World Inc. to Park Place Entertainment Corp. for approximately $3 billion in cash.
Substantially all of the proceeds will be used to reduce its $8.4 billion (at Sept. 30, 1999) debt balance. Fitch
IBCA's rating outlook is positive.
This large disposition (which eliminates a volatile business line), results in improved leverage and continues
to move the company toward its goal of achieving investment grade status. The upgrade reflects the company's improved
financial profile, as well as the strong performance and quality of Starwood's portfolio, as seen through continued
improvements in revenue per available room (RevPAR). Management continues to emphasize the strengths of their franchise
including the supply constrained markets in which the company focuses and operates, compared to generally pessimistic
expectations for the hotel sector, particularly markets with lower barriers to entry.
The ratings also reflect concerns regarding the untested nature of the portfolio under adverse economic conditions,
the impact of new hospitality supply in its less supply constrained markets, Starwood's Latin American and Asian
exposure, debt maturities in 2000, and the continued pressures related to the company's underperforming stock price.
Fitch IBCA anticipates the company will continue making progress on several of its key initiatives in 2000 including
asset dispositions which are expected to total $500 million and will likely be used toward the company's announced
stock repurchase program, integration of its $645 million Vistana Inc. acquisition through which the company entered
the timeshare business in October 1999, and its focus on the Starwood Preferred Guest program. Pro forma at Sept.
30, 1999 for the sale of Ceasars, debt service coverage (after adjusting for maintenance capital expenditures/ff&e
of 4% of revenues) is 2.4x and debt to EBITDA is 4.3x.
Recognizing the pressures the company faces on the equity front, Fitch IBCA's ratings outlook for the company is
positive based on operating plans articulated by management, increasing comfort with the defensive characteristics
of its owned and leased portfolio, and the benefits that are expected to result from the completion of strategic
renovations and re-developments which have yet to be reflected in cash flow.
Starwood has a global presence, operating its portfolio, which includes 710 properties totaling more than 223,000
rooms, in 76 countries on 5 continents. The portfolio is primarily flagged under its core upscale brands such as
Sheraton, Westin, ``W'' and Four Points, but also includes prestigious brands such as St. Regis and CIGA.
The following ratings are upgraded by Fitch IBCA and removed from RatingAlert-Positive:
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Contact:
Fitch IBCA, New York
John Olert, 212/908-0663
or
Mike Simonton, 212/908-0625
or
Media Contact, 212/908-0810