S&P cuts ratings on Wyndham Worldwide

The ratings were lowered one notch to investment-grade "BBB-" from "BBB" and were removed from CreditWatch, where they were placed with negative implications on June 3. The ratings outlook is stable.

Analyst Emile Courtney expects the company will maintain leverage higher than what its previous rating level allows as the company experiences a slowdown in revenue in 2009 compared with growth levels in 2008 and spends large sums on timeshare investments in the intermediate term.

The company has spent $700 million in timeshare development spending since March of last year, and Courtney expects that spending level to stay constant. At its new ratings level, Wyndham will have enough flexibility to absorb additional investments.

Although Wyndham reported a year-over-year earnings decline of about 10 percent in the March 2008 quarter, the analyst expects that the company will achieve growth in the high single-digit area in 2008. That growth is expected to slow to the low single-digit range in 2009, despite a slowing U.S. economy, due to stable growth characteristics of the company's lodging franchise and timeshare exchange and vacation rental businesses.

Courtney said the company will recognize deferred timeshare revenue and profit through the rest of the year as well as more hotel rooms, increasing membership in its timeshare exchange system and higher average net prices per vacation rental. The growth includes profit from acquiring Microtel Inns & Suites and Hawthorne Suites brands from a subsidiary of Global Hyatt Corp. for $131 million in July.

Shares gained 73 cents, or 4.3 percent, to $17.71 in afternoon trading.