New York, November 08, 2012 -- Moody's Investors Service upgraded the preferred stock and preferred shelf ratings of FelCor Lodging Trust, Inc. to Caa2 and (P) Caa2, respectively. Moody's also affirmed all other ratings of FelCor Lodging L.P. (senior secured at B2) and FelCor Lodging Trust, Inc. (corporate family at B3) with a stable outlook.

Ratings Rationale

The rating action on FelCor's Caa2 preferred stock rating reflects that on October 31, 2012, the REIT paid all of the outstanding accrued preferred dividends including the remaining arrearage of $37.7 million. As a result of the repayment of the preferred dividends in arrears, FelCor's preferred securities are no longer in default under Moody's definition; therefore, Moody's raised FelCor's preferred rating in accordance with its notching practices for REITs with corporate family ratings below Ba2.

FelCor's corporate family rating of B3 reflects the solid performance of the REIT's diverse portfolio with 6.2% RevPAR growth in Q3'12, good asset quality benefiting from on-going repositioning and capital recycling, as well as its experienced management team. FelCor's RevPAR growth was underpinned by 6.9% ADR increase and solid 74.8% occupancy. The REIT plans to spend approximately $85 million on improvements and additions to its hotel portfolio in 2012, in addition to $35 million in value-enhancing redevelopment opportunities at the Morgans Hotel, Embassy Suites -- Myrtle Beach and The Fairmont Copley Plaza. Of those amounts, $100 million was spent in the first nine months of the year. Moody's views these investments positively and expects them to yield improved market penetration and stronger operating results for FelCor. Year-to-date, FelCor also sold nine of its non-strategic hotels for $198.5 million and utilized proceeds to pay off the preferred dividend arrearage and reduce debt. Since the beginning of its disposition program in December 2010, FelCor sold 19 of the planned 39 hotels for total proceeds of $429 million. We expect FelCor to continue its asset sale program and to apply future proceeds to de-leveraging.

Counterbalancing these strengths, the REIT's debt protection metrics, at September 30, 2012, remain challenged with significant leverage (64.4% debt plus preferred/gross assets and 7.8x net debt/EBITDA), high levels of secured debt (49% secured debt/gross assets) and weak fixed charge coverage (1.1x).

The stable rating outlook reflects FelCor's continued success in extending its maturities, as well as the positive trends in the hospitality space benefiting the REIT's portfolio.

Positive rating movement would depend on continued improvement in FelCor's operating fundamentals and successful de-leveraging as evidenced by strengthening in its credit metrics with fixed charge closer to 1.5x (including preferred dividends) and net debt/EBITDA under 7x. Good liquidity would also be needed for an upgrade.

Downgrade pressure would occur from failure to strengthen its debt protection measures (especially fixed charge coverage) over the next few quarters, any liquidity concerns, operational reversals or challenges in executing the asset disposition program.

The following ratings were upgraded with a stable outlook:

FelCor Lodging Trust, Inc. -- preferred stock at Caa2, preferred shelf at (P)Caa2

The following ratings were affirmed with a stable outlook:

FelCor Lodging Limited Partnership -- senior secured debt at B2

FelCor Lodging Trust, Inc. -- corporate family rating at B3

Moody's last rating action with respect to FelCor was on April 26, 2011, when Moody's assigned a B2 rating to the new $500 million senior secured notes of FelCor Lodging L.P.

FelCor Lodging Trust, Inc. [NYSE: FCH] is a real estate investment trust headquartered in Irving, TX; it is the nation's largest owner of upper-upscale, all-suite hotels. FelCor owns interests in 67 properties located in major markets throughout 22 states. At September 30, 2012, FelCor reported total assets of $2.3 bn and total equity of $524 mm.

The principal methodology used in this rating was Moody's Approach for REITs and Other Commerical Property Firms published in July 2010. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

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Maria MaslovskyAsst Vice President - Analyst Commercial Real Estate Finance Moody's Investors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653Nick Levidy MD - Structured Finance Commercial Real Estate Finance JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653 Releasing Office: Moody's Investors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653(C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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