Fitch affirms Orbis

Fitch Ratings said it affirmed Poland-based Orbis SA's national long-term rating at BBB+(pol) with a stable outlook.

The agency said the rating reflects the Orbis group's leading position in an increasingly competitive Polish market and the strong business relationship between Orbis and its strategic shareholder, Accor, which has resulted in improved management, ongoing cost reductions and a new strategy for the group based on Accor's proven know-how in budget hotel development. The rating does not factor in any direct support from Accor should Orbis find itself in financial difficulties.

The rating also reflects Orbis' below-average operating ratios when compared with its European peers, and the group has high operating leverage because virtually all of its hotels are either owned or leased on fixed-payment terms. Lease adjusted net debt to EBITDAR was 1.8x at the end of 2005.

Orbis' strategy seeks to address the weaknesses of its existing hotels by overhauling its hotel portfolio. In Fitch's view, this should improve the group's business profile by making it more competitive and increasing its exposure to economy hotels to 55% of its hotel portfolio from the current 19%. The economy hotel segment is an attractive segment in Poland given the insufficient supply, and Orbis's increased exposure to this segment should lessen the cyclicality of the group's profits and cash flows, the agency said.

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