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Investing.com -- S&P Global Ratings has revised Hyatt Hotels Corp (NYSE:H).’s outlook to stable from negative and affirmed its ’BBB-’ issuer credit rating, citing accelerated asset sales and planned debt reduction.
The rating agency expects Hyatt to generate approximately $1.7 billion in net proceeds from the sale of Playa-owned real estate, which will be used to repay its $1.7 billion delayed draw term loan that funded the Playa acquisition earlier this year.
Following this debt repayment, S&P Global Ratings forecasts Hyatt’s leverage to decrease to approximately 3.5x in 2025, significantly lower than previous projections which assumed the company would sell Playa’s real estate incrementally through 2027.
After the sale closes later this year, Hyatt will enter into 50-year management agreements for 13 of the 15 Playa properties. The company expects these management contracts to add $60 million-$65 million of gross fees in 2026, though 2025 will see minimal benefit as the new contracts won’t be signed until the transaction closes.
The rating agency views the retention of existing management agreements and addition of five new contracts as strengthening Hyatt’s competitive advantages and improving cash flow resilience. Upon completion of its asset sale program, Hyatt has indicated it will generate over 90% of its EBITDA from asset-light revenue streams.
S&P Global Ratings projects Hyatt will improve its EBITDA margin to the low-40% range by 2027 from approximately 30% in 2024.
The Playa portfolio includes 15 all-inclusive resort properties in Mexico, the Dominican Republic, and Jamaica, with eight already operating under Hyatt’s Ziva and Zilara brands through existing franchise agreements.
While Hyatt may achieve its financial policy target of reducing gross leverage to 3x over the next year or two, S&P notes that the company’s willingness to periodically increase leverage for acquisitions remains a key risk factor. Prior to acquiring Playa, Hyatt purchased Standard International for $150 million and invested €359 million in a joint venture with Grupo Pinero in December 2024.
The stable outlook reflects S&P’s forecast that Hyatt’s lease-adjusted debt to EBITDA will be about 3.5x by year end, improving to 3.0x or below in 2026.
S&P could lower its rating if Hyatt’s leverage exceeds expectations, sustains adjusted net debt to EBITDA above 3.75x, or maintains operating cash flow to debt below 20%. Conversely, the rating could be raised if Hyatt maintains lease-adjusted net leverage below 3x while accounting for share repurchases, potential debt-financed acquisitions, and market volatility.
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