Moody's downgrades Hilton Group

Moody's Investors Service said it downgraded the senior unsecured long-term ratings of Hilton Group plc and its guaranteed subsidiaries Hilton Group Finance plc and Hilton Group Finance (Jersey) Ltd. to Ba2 from Baa3. The outlook is stable.

This concludes the review begun on Dec. 29. and follows Hilton Group plc's announcement that it will distribute an exceptional dividend of 240 pence per share on April 25 following the completion of the disposal of its hotel assets to Hilton Hotels Corp.

Moody's said the return of cash to shareholders, up to £4.2 billion if the £300 million convertible bond due 2010 is converted, will leave the company with credit metrics that are too weak for the investment grade category, given the company's less diversified business profile following the disposal of its hotel division.

The agency predicted that the financial profile of Ladbrokes plc, as the company has been renamed, will deteriorate following the hotel disposal and the cash distribution to shareholder: pro-forma net adjusted debt to EBITDAR to be close to 4x and RCF to net adjusted debt to reach the low teens as of Dec. 31, 2006.

Moody's did, however, recognize the company's strong market position in U.K. retail betting, its experienced management team and the business's proven degree of resilience to a potential economic downturn.

S&P downgrades Hilton Group

Standard & Poor's said it lowered its long-term corporate credit rating on Ladbrokes plc, formerly Hilton Group plc, to BB from BBB. The rating has been removed from CreditWatch with negative implications, where it was placed on Oct. 14, and the outlook is stable.

S&P also lowered the senior unsecured debt ratings on Ladbrokes and its guaranteed subsidiary to BB from BBB and kept them on CreditWatch with negative implications.

The downgrade follows the completion of the group's sale of its entire global hotel division to Hilton Hotels Corp. (BBB-/negative watch/A-3) and the reorganization of the remaining company as a gaming operator. Ladbrokes has pledged to return all of the £3.7 billion proceeds from the hotel sale to its shareholders, resulting in a material increase in financial leverage for the continuing company that will remain the obligor under the outstanding £300 million convertible bond issue and the £2 billion euro medium-term note program, of which £800 million is outstanding.

S&P said the ratings reflect Ladbrokes' aggressive financial profile, with initial lease-adjusted net debt to EBITDA in the 4.0x to 4.5x range. The high levels of indebtedness are partly mitigated by the group's solid business position as the market leader in the stable and cash-generative U.K. gaming industry, the agency said.

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