• Wyndham’s woes

Wyndham Worldwide has dropped plans to raise $200m through a share issue after stinging criticism from a billionaire hedge fund manager.

The hotelier and timeshare operator said it had wanted to strengthen its balance sheet but the move was described by Leon Cooperman of Omega Advisors as "about as dumb as anything I've ever seen".

The planned equity issue, which was announced at the same time as the final quarter results, was hastily scrapped after Cooperman's comments and a fall of 30% in Wyndham's share price.

Cooperman's main criticism was why the company was issuing stock at $5 when it had bought back stock at up to $30 within the past few years. The situation was "ridiculous" he said during a conference call on the results.

On the Monday following the original announcement on Friday, Wyndham CEO Steve Holmes said the plans had been reconsidered. "The market reaction to our announcement was strongly negative and we appreciate the feedback from our shareholders."

He added that there was no need to issue equity and that the company had adequate liquidity to meet the operating needs of the business.

During the original results conference call, CFO Gina Wilson said she expected revpar to decline by 6% to 10% in 2009. System size, however, was still expected to grow by between 3% and 6%.

Holmes corrected a couple of numbers given by Wilson during the conference call including the notable blooper that interest cover was 20 times. It is in fact 2.1 times.

The current pipeline is 111,000 rooms of which 55% is new construction and 20% of the new construction pipeline already in the ground. Growth outside of the US has increased significantly. A year ago, 17% of the total rooms under Wyndham's various flags were international. Now it is 19%. About 42% of the pipeline is international.

Holmes said Wyndham had held up well in the past year given the severity of the economic environment. It finished the year less than 5% below its EBITDA guidance range issued in October 2007.

The hotel group grew EBITDA in 2008 by 4% to $753m with revpar in the fourth quarter down 6.4% in constant currency or down 9.2% including currency impact. Timeshare ownership continues to be hammered with sales expected to be down 40% in 2009.


HA Perspective: Wyndham is a massive hotel company that is often overlooked. It has 593,000 rooms under its flags (just shy of IHG's 620,000) and passed through the 7,000th property milestone during the year (way ahead of the nearly 4,200 at IHG).

But the company did itself no favours with its badly misjudged call on issuing equity. And the performance of its CFO during the conference call was also less than compelling.

With its debt currently only just securing investment grade status and ongoing problems within its timeshare operations, this year looks set to be torrid.

It has already taken out $180m of costs from the business, mostly in timeshare where 50 sales offices have been closed.

The big issue for the company is how comfortably timeshare, which includes vacation ownership and the exchange programme RCI, sits with the smaller, and largely budget or economy, hotel business.

A disposal of some kind might be on the cards if the investment grade rating slips and / or debt covenants are breached.

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