Correction: Fitch Upgrades Starwood IDR to 'BBB-'; Outlook Stable.

NEW YORK -- (This corrects a press release issued yesterday and contains revised bond security information in the final paragraph of the release)

Fitch Ratings has upgraded Starwood Hotels & Resorts Worldwide Inc.'s (NYSE:HOT) credit ratings as follows:

--Issuer Default Rating (IDR) to 'BBB-' from 'BB+';

--Bank credit facility to 'BBB-' from 'BB+';

--Senior unsecured notes to 'BBB-' from 'BB+'.

The ratings apply to roughly $2.5 billion of outstanding debt as of June 30. The Rating Outlook has been revised to Stable from Positive as the likelihood for significant continued share repurchase activity and the potential for strategic acquisitions are likely to limit further upside to Starwood's credit ratings over the next 12 months.

The upgrade is based on the company's continued execution on its plan to sell assets in order to improve its balance sheet, its business mix reorganization and the continued strength of lodging fundamentals. The ratings reflect Starwood's leading brands, high quality assets, substantial product and geographic diversification, and its solid position in the timeshare business.

Potential credit quality deterioration could come from capital deployment decisions (a higher than expected level of share repurchase or a heavily debt-financed acquisition) and contingent commitments such as loans and equity contributions to partners, third-party guarantees and potential timeshare commitments. However, Fitch believes Starwood's investment grade profile with its improved balance sheet and increased financial flexibility mitigates these concerns and allows for some flexibility in credit metrics.

In April 2006, the company completed the sale of 33 properties to Host Hotels for $4.1 billion. Following that transaction, Starwood improved its business mix as it significantly increased the amount of cash flow from its managed/franchise business. The greater mix of fee business results in a more capital efficient company with stronger margins, higher returns on capital, less cyclicality and increased financial flexibility.

Initial data points for the 2007 demand picture indicate the robust lodging operating environment should continue. Earlier this month, initial outlooks for 2007 RevPAR growth were given by Marriott (+7% to +8%) and Host (+6% to +8%). Marriott also indicated that it expects compound annual RevPAR growth of 4%-8% from 2007-2009; this outlook allows for some continued slowdown beyond 2007 but is still a very healthy revenue environment for the industry over the next few years. Given the additional backdrop of tame supply growth of 1%-2% over the next two-three years, the lodging industry remains poised to perform well in an environment of low-single digit economic growth.

Due to the strong lodging operating environment and asset sales, Starwood has continued to improve its credit profile and reduce leverage since Fitch changed the Rating Outlook to Positive in November 2005 following the announcement of the asset sale to Host. From the beginning of 2005 to second quarter 2006, Starwood has sold 49 properties for $4.9 billion (roughly $2 billion of which was in cash) and retained long-term management contracts on most of the properties, thereby locking in a future cash

flow stream.

As a result, LTM leverage (lease-adjusted debt to EBITDAR) as of June 30, 2006 has improved to 2.8 times (x) from 3.7x at the end of 2005 and 4.6x at the end of 2004. Debt has been reduced by more than $1.3 billion to $2.82 billion as of June 30, 2006 from $4.15 billion as of Dec. 30, 2005. Much of the debt reduction in 2006 was a reduction of secured debt, and Starwood plans to raise capital on an unsecured basis going forward. As a result, Starwood has significantly increased its unencumbered asset base.

Starwood used much of the proceeds from the Host transaction earlier this year to repurchase shares. Over the next couple of years Fitch believes Starwood will continue to be shareholder friendly with respect to share buybacks and Starwood could consider potential strategic acquisitions. The current investment grade profile could be maintained despite these potential leveraging transactions because Fitch believes that over the next 12 months-18 months Starwood will continue to selectively sell owned hotel assets and in many cases retain long-term management contracts.

It should be noted that as a result of the improved balance sheet, reduction in secured debt robust operating environment and solid cash flow generation ability, Starwood could be considered an attractive leveraged buyout (LBO) candidate in a very active current LBO environment. Accordingly, if a transaction were to materialize, the absence of a change of control put and covenants limiting leverage in Starwood's bond indentures exposes bondholders to price risk in the event of a leveraged transaction. The bonds do have covenants requiring that any security be shared equally and ratably with the unsecured bonds. However, due to the Starwood board of directors' ability to designate restricted and unrestricted subsidiaries, this covenant does little to protect bondholder security status.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.