OREANDA-NEWS. S&P Global Ratings today assigned its 'BB+' issue-level rating (in line with the 'BB+' corporate credit rating) and '4L' recovery rating to McLean, Va.-based co-borrowers Hilton Escrow Issuer LLC and Hilton Escrow Issuer Corp.'s proposed $1 billion of senior notes due 2024. The co-borrowers will ultimately be merged into the surviving borrower entity: Hilton Domestic Operating Company Inc. The '4L' recovery rating reflects our expectation for average (30% to 50%) recovery for lenders in the event of a payment default.

Hilton expects to use the proceeds to repay a portion of debt of its unrestricted US real estate subsidiaries and fund other labilities and expenses of the new real estate company Park Hotels & Resorts to fund transaction fees and expenses related to the planned spin-off of Hilton's owned real estate and timeshare operations. The company also expects to use the proceeds to prepay a portion of the company's non-extended term loan under its credit facility due 2020. We believe that cash distributions to Hilton from timeshare company Hilton Grand Vacations (HGV) following the completion of planned future borrowings at that entity (as described in the Form 10-12B filed June 2, 2016) will partially offset the additional unsecured debt. Despite the additional unsecured debt in the capital structure, we believe that Hilton will utilize the receipt of funds from HGV, and about $250 million in additional proceeds from the notes, to prepay outstanding amounts under the non-extended term loan due 2020, leading to only a modest deterioration in recovery prospects for unsecured lenders as a result. The additional unsecured borrowings move our recovery rating from the upper to the lower half of the '4' recovery band but do not affect the overall recovery or issue-level rating.

For the full corporate credit rating rationale, see " Hilton Worldwide Holdings Inc. Rating Raised To 'BB+' On Real Estate And Timeshare Spin-Off Filings; Outlook Positive," June 2, 2016.

RECOVERY ANALYSIS

Key analytical factors

Our simulated default scenario contemplates a payment default in 2021, reflecting prolonged economic weakness and significantly reduced travel by corporate and leisure customers. We assume a reorganization following the default, using an emergence EBITDA multiple of 8x to value the company.

Simulated default assumptionsYear of default: 2021EBITDA at emergence: $760 millionEBITDA multiple: 8xSimplified waterfallNet enterprise value (after 5% administrative costs): $5.8 billionPriority claims: $30 millionNet enterprise value after priority claims: $5.8 billion----------------------------------------------------Secured debt: $4.7 billion--Recovery expectation: 90% to 100%Senior unsecured debt and pari passu claims: $2.7 billion--Recovery expectation: 30% to 50% (low end of range)Note: All debt amounts include six months of prepetition interest.