Choice Hotels Int'l Sr Debt Rated 'BBB-' by S&P.NEW YORK--(BUSINESS WIRE)--Standard & Poor's CreditWire 4/15/98-- Standard & Poor's today assigned its triple-'B'-minus rating to Choice Hotels International Inc.'s $100 million senior note offering due 2008. In addition, Standard & Poor's assigned its triple-'B'-minus bank loan rating to the company's $150 million three-year unsecured revolving credit Revolving Credit A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. facility and $150 million five-year unsecured term loan. A triple-'B'-minus corporate credit rating also was assigned. The outlook is stable. The ratings reflects the relative stability of Choice's cash flows, low capital intensity and lack of real estate exposure, and consequently its strong free cash flow production. Choice's lodging franchise system consists of seven hotel chains, primarily in the limited service segment. While still subject to the same business cycle fluctuations as hotel owners, Choice receives fees based on hotel revenues, and is not dependent on hotel profitability. Moreover, Choice has a very large franchise base, with over 3,000 properties and about 300,000 rooms, which also helps offset cyclicality in the industry and potential overbuilding in the limited service segment. Unit growth is the primary cash flow driver of the business, and the company has a strong pipeline of over 800 hotels under development. The challenge for Choice, as with any franchise organization, is to keep its brands attractive and competitive. Some of Choice's brands have yet to attain critical mass or a distinct consumer profile. Also, the company is in the process of tightening quality standards and implementing a more sophisticated yield management system, both of which will improve its franchise systems over time. The company's new Mainstay Suites Mainstay Suites is a brand of mid-priced extended stay hotels franchised by Choice Hotels International. Mainstay Suites hotels provide comfortable and affordable accommodations to extended stay travelers as well as provide many amenities to its guests. brand is being rolled out in the very competitive extended-stay market. While its difficult to build a new brand, Choice is not bearing the development or seasoning risk. Operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: in excess of 50% on the franchise business reflect low operating costs operating costs npl → gastos mpl operacionales and the ability to pass on reservation and advertising costs to the franchisees. For the 12 months ending Dec. 31, 1997, the company generated $87.5 million of earnings before interest, taxes, depreciation, and amortization Earnings before interest, taxes, depreciation, and amortization (EBITDA) A financial measure defined as revenues less cost of goods sold and selling, general, and administrative expenses. (EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become ), and had $282.8 million of debt. Of this debt, $115 million is a note due from Sunburst Hospitality, the company recently spun off from Choice that now holds its real estate assets. The note is noncash pay and due in five years, but is expected to be refinanced. Flexibility is good as a result of strong cash flow growth, modest capital expenditures, and low incremental costs Costs which are additional costs to the Service appropriations that would not have been incurred absent support of the contingency operation. See also financial management. to expand. OUTLOOK: STABLE While Choice has some debt capacity at the current rating level for acquisitions and share repurchases Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. , Standard & Poor's expects the company's financial policy to remain moderate and rely primarily on internally generated cash flow to fund new growth opportunities. -- CreditWire CONTACT: Greg Zappin, 212/208-8615 For more information on criteria or subscriptions: http://www.ratings.standardpoor.com Today's News On The Net - Business Wire's full file on the Internet with Hyperlinks to your home page. URL URL in full Uniform Resource Locator Address of a resource on the Internet. The resource can be any type of file stored on a server, such as a Web page, a text file, a graphics file, or an application program. : http://www.businesswire.com |
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