NEW YORK— Moodys Investors Service has placed its B1 senior unsecured and B3 subordinated debt ratings of MeriStar Hospitality Corp. and MeriStar Hospitality Operating Partnership, L.P. under review for possible downgrade, according to a Reuters report. The rating review follows MeriStars recent announcement related to lowered earnings guidance for third quarter. Continued weakness in business and leisure demand are contributing to the REITs lower than anticipated operating performance, Reuters indicated. Moodys is concerned that the REITs earnings and cash flow could fall below expectations for the remainder of the year and 2003 given the dim near-term prospects for lodging demand recovery, said the report, adding the REIT has been operating with stressed credit statistics and weak liquidity for several quarters. Moodys review will focus on MeriStars capacity to endure further market stress and the REITs financial position, including the effect of reduced earnings and cash flows on its capital structure, and liquidity position, said the company, adding its assessment also will consider the outcome of MeriStars bank loan negotiations, including pricing, structural subordination, collateral and covenant requirements. The following ratings were placed under review for possible downgrade: MeriStar Hospitality Operating Partnership, L.P.: Senior secured bank credit facility at B1; senior unsecured debt rating at B1; senior unsecured shelf at (P)B1; subordinate shelf at (P)B3. MeriStar Hospitality Corp.: Senior unsecured shelf at (P)B1; senior subordinated debt at B3; subordinate shelf at (P)B3. CapStar Hotel Co.: Senior subordinated debt at B3. SOURCE: Reuters
