Moody's Investors Service revised to stable from negative the Baltimore Hotel Corporation's convention center hotel revenue bonds for a 756-bed Hilton, citing improved cash flow.
Moody's also Dec. 11 affirmed the hotel bonds' Ba1 senior and Ba2 subordinate ratings.
The bonds were issued in 2006 to finance the construction of the Hilton that opened in August 2008 adjacent to the Baltimore Convention Center. The senior lien bonds have $241.56 million in debt outstanding and the subordinate lien bonds are outstanding in the amount of $52.1 million.
Moody's analysts Kurt Krummenacker and Chee Mee Hu said the bonds were revised to stable in large part to the Hilton seeing recent year-over-year improvements in revenue per room. The analysts add however that cash flows remain below what is needed to cover all annual debt service requirements without tapping into citywide hotel occupancy tax collections.
"The ratings reflect the hotel's resilient, yet volatile financial performance during the economic downturn and recovery of revenue growth over the past three years." Moody's analysts said in their report. "Although the hotel generally has outperformed its competitive set in Baltimore, revenues continue to fall short of the levels expected at the time of the initial bond financing."
Moody's says that the revenue bonds could see a rating upgrade if hotel operating performance generates margins sufficient to cover debt service without needing to utilize hotel occupancy tax support. A major challenge the non-profit Baltimore Hotel Corp. faces going forward is the Hilton being largely dependent on the convention center's ability to successfully compete in an increasingly crowded field of other cities on the East Coast, according to Moody's.
