New Athena Acquisition Co. Inc. (Aimbridge) Rated 'B' On Leveraged Buyout; Outlook Negative

  • New Athena Acquisition Co. Inc. (Aimbridge) plans to issue a $60 million revolving credit facility due in 2024, a $350 million first-lien term loan due in 2026, and an unrated $100 million second-lien term loan due in 2027 to partly finance its acquisition by financial sponsor Advent International.
  • We are assigning our 'B' issuer credit rating to Aimbridge with a negative outlook.
  • In addition, we are assigning our 'B' issue-level rating and '3' recovery rating to the proposed $60 million revolving credit facility and $350 million first-lien term loan.
  • The negative outlook reflects our expectation for very high adjusted debt to EBITDA in the 7x area at the end of 2019, which is weak compared to our 7x downgrade threshold. In addition, our negative outlook incorporates the risk that potential ill-timed acquisitions just before or concurrent with a downturn in the lodging cycle could sustain leverage above 7x.
NEW YORK (S&P Global Ratings) Jan. 10, 2019-- S&P Global Ratings today took 
the rating actions listed above. Our 'B' rating on Aimbridge reflects our 
forecast for very high adjusted leverage in the 7x area at the end of 2019, 
the fragmented and highly competitive third-party hotel manager marketplace, a 
highly acquisitive growth strategy, and hotel owner concentration in the 
company's management contract portfolio. High leverage makes Aimbridge 
vulnerable in an unexpected lodging downturn over the next two years, and in 
the event that one or more of Aimbridge's hotel customers decides to sell 
hotels. This would introduce the risk that the buyer chooses to replace 
Aimbridge with another hotel manager and the company loses a meaningful number 
of management contracts unless it can persuade the new owner to retain them. 

The negative outlook reflects our expectation for very high adjusted debt to 
EBITDA in the 7x area at the end of 2019. In addition, our negative outlook 
incorporates the risk that potential ill-timed acquisitions could sustain 
leverage above 7x.

We could lower the rating if we believe adjusted debt to EBITDA will be 
sustained above 7x or adjusted EBITDA coverage of interest expense approaches 
the mid-1x area. This could result from a deceleration in the lodging cycle, 
lower-than-anticipated organic EBITDA growth, the loss of key customers and 
associated hotel management contracts, leveraging acquisitions, or 
debt-financed cash distributions to shareholders.

We could revise the outlook to stable if the company improves adjusted 
leverage meaningfully below 7x and we gain confidence that leverage would 
remain below that level, incorporating any potential leveraging acquisitions.