Moody's Eyes Host Marriott Ratings

The Ba3 senior unsecured debt rating and B3 preferred stock rating of Host Marriott Corp., Bethesda, Md., and its subsidiaries have been placed under review for possible downgrade by Moody's Investors Service.The rating action is based on the real estate investment trust's July 26 announcement that it does not expect to make preferred dividend distributions in the fourth quarter due to restrictions in its bond indenture, Moody's said. Since the second quarter of 2002, Host Marriott has had interest coverage below the covenant level in its bond indenture governing the REIT's ability to make restricted payments, including preferred dividend distributions. "Host Marriott has been able to address this restriction because, so far, it has been able to generate sufficient taxable income to be required under REIT rules to make distributions to its preferred stockholders," the rating agency said. However, Host Marriott is projecting that, due to weak performance in the first half and an expectation of continued weakness in lodging demand through the rest of 2003, its taxable income for 2003 will not be sufficient for the REIT to avoid being barred from paying fourth-quarter preferred dividends, Moody's said. The rating agency can be found online at http://www.moodys.com.