Fitch downgrades Hilton Group

Fitch Ratings said it downgraded Hilton Group plc's issuer default rating to BBB- from BBB+, short-term rating to F3 from F2 and senior unsecured debt rating to BBB-. The ratings have been taken off Rating Watch negative and now have a stable outlook.

This action follows the announcement confirming the sale of Hilton Group's hotel assets to Hilton Hotels Corp. for £3.3 billion and the concomitant return of up to £4.2 billion to Hilton Group's shareholders through a special dividend. Hilton Group will consist of the gaming activities of Ladbroke and the group's name will change to Ladbrokes plc.

Although the financial ratios of Ladbrokes will not be materially different from the former Hilton Group's, the reduced geographical and business diversification, as well as the reduced asset base, significantly increases the credit risk of the remaining group, the agency said.

However, Fitch said Ladbrokes' betting business remains stable and cash generative. Furthermore, the current conservative leverage (4.2x in fiscal year 2005) could be maintained as management's future plans intend to leverage off the well-recognized and trusted Ladbroke brand with non-capital intensive projects, the agency predicted.

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