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Moody’s reviews Restay Hotels TMK deal for possible downgrade
By k on June 22, 2009
Approximately JPY 2.2 billion in a mezzanine specified loan and a specified bond affected Tokyo, June 22, 2009 -- Moody's Investors Service has placed under review for possible downgrade the ratings of Restay Hotels Tokutei Mokuteki Kaisha's Mezzanine Specified Loan and Specified Bond. Final maturity will take place in May 2014. Mezzanine Specified Loan, Baa1 placed under review for possible downgrade; previously, Baa1 assigned on May 18, 2007 Specified Bond, Baa1 placed under review for possible downgrade; previously, Baa1 assigned on May 18, 2007 This transaction is backed by 19 leisure hotels, which are operated by Restay Co., Ltd. and are located all over Japan. The deal features a scheduled amortization and an operator replacement trigger if the operator's performance declines below a certain level. The rating action reflects Moody's view regarding the uncertainty of the leisure hotels' performance, given that the assets have underperformed our expectation in light of the ratings assigned to the Mezzanine Specified Loan and Specified Bond. As consumer spending continues to weaken, leisure hotels are facing declines in 1) revenue per customer, 2) the length of stay, and 3) the number of customers, etc. In Moody's view, the performance of the operator in this transaction is better than the market average, but its profitability will be negatively affected by the ongoing recession, as will that of the industry overall. In its review, Moody's will examine the operator's measures to improve the profitability of the hotels in light of the difficult business environment. The principal methodology used in rating the transaction was "Moody's Approach to Rating Japanese Whole Business Securitizations" (April 2007), which can be found at www.moodys.com in the Credit Policy & Methodologies directory, in the Ratings Methodologies subdirectory. Other methodologies and factors that may have been considered in the process of rating this issue can also be found in the Credit Policy & Methodologies directory. Moody's Investors Service is a publisher of rating opinions and research. It is not involved in the offering or sale of any securities, nor is it acting on behalf of the offering party. This release is not a solicitation or a recommendation to buy, hold or sell securities.
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