Approximately $1.3 billion of Securities Affected.
New York, October 10, 2002 -- Moody's Investors Service has placed its B1 senior unsecured and B3 subordinated debt ratings of MeriStar Hospitality Corporation and MeriStar Hospitality Operating Partnership, L.P. under review for possible downgrade. The rating review follows MeriStar's recent announcement related to lowered earnings guidance for third quarter 2002. Continued weakness in business and leisure demand are contributing to the REIT's lower than anticipated operating performance. Moody's is concerned that the REIT's earnings and cash flow could fall below expectations for the remainder of 2002 and 2003 given the dim near-term prospects for lodging demand recovery. The REIT has been operating with stressed credit statistics and weak liquidity for several quarters.
Moody's review will focus on MeriStar's capacity to endure further market stress and the REIT's financial position, including the effect of reduced earnings and cash flows on its capital structure, and liquidity position. Our assessment will also consider the outcome of MeriStar's bank loan negotiations, including pricing, structural subordination, collateral and covenant requirements.
The following ratings were placed under review for possible downgrade:
MeriStar Hospitality Operating Partnership, L.P. - Senior secured bank credit facility at B1; senior unsecured debt rating at B1; senior unsecured shelf at (P)B1; subordinate shelf at (P)B3.
MeriStar Hospitality Corporation - Senior unsecured shelf at (P)B1; senior subordinated debt at B3; subordinate shelf at (P)B3.
CapStar Hotel Company - Senior subordinated debt at B3.
MeriStar Hospitality Corporation [NYSE: MHX], based in Washington, DC, USA, is an umbrella partnership "paper-clipped" REIT that owns and manages 109 full-service hotels. The REIT focuses on the upscale lodging segment with its properties carrying flags including Hilton, Sheraton, Marriott, Westin, Doubletree and Holiday Inn.
New York
Lesia Bates Moss
Senior Vice President
Real Estate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
John J. Kriz
Managing Director
Real Estate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Copyright 2002 by Moody's Investors Service
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