Moody's may upgrade FelCor

Moody's Investors Service said it placed FelCor Lodging LP's B1 senior unsecured debt rating and FelCor Lodging Trust Inc.'s B3 preferred stock on review for possible upgrade.

The rating review were prompted by FelCor's announcement that it has executed an agreement modifying the current management agreements covering all 49 FelCor Lodging-owned hotels managed by InterContinental Hotels Group. This agreement provides FelCor Lodging with the flexibility to sell InterContinental Hotels assets without payment of liquidation damages or reinvestment of proceeds required by the old management agreement.

Many InterContinental Hotels-flagged hotels owned by FelCor Lodging have not performed to expectations, Moody's said. FelCor Lodging's sale of non-strategic assets that are under-performing or located in markets in which the REIT has excess concentration will enable FelCor Lodging to reduce leverage and improve operating performance, as well as enhance the geographic diversity of its hotel investment portfolio - issues that have been constraining the REIT's ratings.

In addition, FelCor Lodging's business environment improved sharply in 2005. Revenue per available room increased by 9%, to $74.31 for the first nine months, primarily due to a 6% increase in the average daily rates, the agency said.

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