CORPORATES

CREDIT OPINION NH Hotel Group S.A. 28 April 2020 Update following placement of B1 CFR under review for Update possible downgrade Summary On March 24, 2020, we placed NH Hotel Group S.A.'s (NH Hotel) B1 corporate family rating (CFR) under review for a possible downgrade.

RATINGS Lodging has been one of the sectors most significantly affected by the coronavirus outbreak, NH Hotel Group S.A. given its exposure to travel restrictions and sensitivity to consumer demand and sentiment. Domicile Spain The rating action was prompted by a sharp decline in room bookings and cancellations, Long Term Rating B1 , Possible Downgrade driven by both fears and travel restrictions since the coronavirus outbreak started in January Type LT Corporate Family Ratings 2020. From a regionally contained outbreak, the virus has rapidly spread to many different Outlook Rating(s) Under Review regions, severely denting air travel and the lodging sector. Our base case assumptions are that the coronavirus pandemic will lead to a severe reduction in the number of hotel guests Please see the ratings section at the end of this report at least over the next three quarters, with potential closures of hotels in the worst affected for more information. The ratings and outlook shown reflect information as of the publication date. locations and very low occupancy or full cancellations for hotels in other countries. We view the outbreak as a social risk under our ESG framework, given the substantial implications for public health and safety. NH Hotel has responded to the crisis with the temporary

Contacts closing of hotels in all the geographies, firstly in Italy and Spain following government’s mandates and then in Central Europe and Benelux due to the muted level of activity; Anke Rindermann +49.69.70730.788 Associate Managing Director cutting administrative costs and opting for short-time temporary layoff of staff & work [email protected] time reduction; and reducing capital spending to preserve cash. We also expect support measures from governments to help the company reduce its staff cost from the second CLIENT SERVICES quarter onward. Americas 1-212-553-1653 However, NH Hotel's B1 CFR reflects, under more normal operating conditions, (1) an Asia Pacific 852-3551-3077 established European platform focused on midscale, upscale and upper upscale urban Japan 81-3-5408-4100 business hotels; (2) successful portfolio turnaround, resulting in RevPAR (revenue per EMEA 44-20-7772-5454 available room) improvements of 4.9% in 2019 fully driven by higher price ADR (average daily rate) and stable occupancy following a 4.4% increase in 2018 and a 5.1% CAGR since 2009; (3) increase in debt/EBITDA to 4.7x in 2019 because of the impact of IFRS 16 from 3.6x in 2018, (4) strengthened interest coverage to 2.4x for 2019 (1.8x in 2018 and 1.4x in 2017), as well as significant liquidity.

These positives are offset by the downside risks caused by the coronavirus outbreak but also the risks associated with NH Hotel's initiatives in Latin America. While limited in scope (9% of net turnover), these efforts carry a measure of risk primarily related to some of the Latin American markets facing difficult macroeconomic environments (Argentina and Mexico), in addition to currency exchange and repatriation issues. MOODY'S INVESTORS SERVICE CORPORATES

As Exhibit 1 shows, our analysis assumes a reduction of around 70% in revenue for NH Hotel in the second quarter of 2020, 35% for the full year and some effects into 2021, with a 10% reduction in revenue translating into a significant decline in EBITDA. This scenario leads to a significant increase in debt/EBITDA for the next 12-18 months. The duration and severity of the travel restrictions could include significantly deeper downside risks including zero occupancy and further pressure on revenue and EBITDA.

Exhibit 1 NH Hotel's debt/EBITDA and EBITA/Interest coverage development compared with the upper and lower limits for the B1 rating for each metric

EBITA/Interest Coverage (lhs) EBITA/Interest Coverage lower limit for B1 rating (lhs) Debt / EBITDA (rhs) Debt/EBITDA upper limit B1 rating (rhs)

2.5x 2.4x 14.0x

2.0x 12.0x 1.8x 10.0x 1.4x 1.5x 8.0x 1.1x 1.0x 1.0x 1.0x 6.0x Debt / EBITDA Debt 0.7x

EBITA / InterestCoverageEBITA 4.0x 0.5x 2.0x

0.0x 0.0x 2014 2015 2016 2017 2018 2019 12-18 Month Forward View

Source: Company Data and Moody's Financial Metrics™

Credit strengths » Supportive macroeconomic and lodging fundamentals in most markets

» Successful completion of a strategic turnaround plan totaling €320 million until 2019, resulting in optimized portfolio quality, stronger KPIs and increased profitability

» Successful refinancing deleverage executed between 2016 and 2018 and with voluntary early redemption 2019 bond and the announced conversion of the convertible bond along with voluntary early repurchase (€40 million) of its 2023 bond in 2018, bolstering leverage and coverage

» Improved leverage although it was hurt by increase in operating leases because of IFRS 16

» Significant pool of fully owned unencumbered assets of €729 million, which increases financial flexibility

» Solid cash position, in combination with an already drawn revolving credit facility and possibility to cut capital spending significantly

» Benefits from Minor International's market position in Asia-Pacific and access to its customer base

This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.

2 28 April 2020 NH Hotel Group S.A.: Update following placement of B1 CFR under review for possible downgrade MOODY'S INVESTORS SERVICE CORPORATES

Credit challenges » Further downside risk because of a potential prolonged slump driven by the coronavirus outbreak, leading to severe reductions in the number of hotel guests at least over the next three quarters, increased closures of hotels and low occupancy

» Macroeconomic, currency and repatriation risks associated with Latin American operations, although offset by upside potential

» Lack of clarity regarding corporate governance, although ameliorated by recent track record of successful operation and improved transparency to prevent and solve conflicts of interest and related-party transactions

» Probably weaker credit quality of the owner, Minor International, than NH Hotel's

Rating outlook Given the current market situation, we do not expect any rating upgrade in the short term. A stabilization of the market situation leading to a recovery in metrics to pre-outbreak levels could lead to an upgrade. More specifically, adjusted debt/EBITDA would have to be around 4x, with interest coverage (EBITA/interest) toward 2.5x, while the company maintains a consistent financial policy.

Further negative pressure would build if the severe travel restrictions last longer than we expect, resulting in significant cash burn and the risk of a material reduction in the company's cash position or a material rise in debt to fund cash consumption.

The review process will focus on (1) the company's continued ability to draw on the credit facilities to further reinforce its liquidity; (2) the current market situation with a review of current occupancy levels and temporary closures of hotels for the next few weeks; (3) cost cutting, capital spending reductions, renegotiation with suppliers and liquidity measures taken by the company and their impact on its cash flow and balance sheet; (4) the stance of NH Hotel's majority owner toward its investment in the company, considering that Minor International Group itself has significant levels of debt and is reliant on cash upstreamed from NH Hotel to service its debt; and (5) the likely impact of the spread of coronavirus in Europe and North America on future hotel bookings and our view regarding the long-term demand profile of the industry. Factors that could lead to an upgrade A rating upgrade is unlikely at this point, given the review for downgrade, but could develop if there is a combination of the following:

» NH Hotel's asset-heavy model shows significant resilience to the disruptions caused by the coronavirus outbreak, so that the variable part of the contracts and the company's ability to cut capital spending and other costs will preserve cash

» Improvement in credit metrics: debt/EBITDA well below 5.0x, coverage (EBITA/interest) approaching 2.5x and cash flow (retained cash flow/net debt) above 15%, all on a sustained basis and including our standard adjustments

» Adequate liquidity and positive free cash flow at all times

Factors that could lead to a downgrade The rating could be downgraded if the business disruptions last longer. No material recovery beyond Q2 2020 will result in significant negative cash flow in 2020 and weaker credit metrics, and will put severe pressure on liquidity. Other factors that could lead to a downgrade include:

» a deterioration in the credit profile, such that leverage rises to above 5.0x, coverage returns to below 1.5x and cash flow/net debt drops below 10%

» any negative liquidity challenges

» a material deterioration in the loan-to-value (LTV) coverage of the secured notes, which could strain the instrument rating

3 28 April 2020 NH Hotel Group S.A.: Update following placement of B1 CFR under review for possible downgrade MOODY'S INVESTORS SERVICE CORPORATES

Key indicators

Exhibit 2 NH Hotel Group S.A

12/31/2015 12/31/2016 12/31/2017 12/31/2018 12/31/2019 12-18 Month Forward View

Revenue (USD Billion) $1.5 $1.6 $1.7 $1.9 $1.9 $1.2 - $1.7 EBITA Margin 10.9% 9.8% 12.1% 17.3% 15.7% -12.8% - 10.6% Debt / EBITDA 5.6x 5.3x 4.5x 3.6x 4.7x 5.8x - 13.5x EBITA / Interest Expense 1.0x 1.1x 1.4x 1.8x 2.4x 0.2x - 1.5x RCF / Net Debt 11.1% 15.2% 17.0% 20.2% 14.7% 0.4% - 13.5%

All ratios are based on 'Adjusted' financial data and incorporate Moody's Global Standard Adjustments for Non-Financial Corporations. Periods are Financial Year-End unless indicated Source: Moody's Financial Metrics™

Profile NH Hotel Group S.A. (NH Hotel) is among the top 10 largest European hotel chains with 368 hotels and 57,466 rooms in 30 countries. In addition to Europe, NH Hotel has a limited presence in Latin America (7% of net turnover in 2019). NH Hotel focuses on midscale and upscale urban business hotels and has been shifting its portfolio toward an “asset-lighter” strategy through management contracts and variable leases. In 2019, the company reported revenue of €1.718 billion.

Exhibit 3 Exhibit 4 Breakdown of net turnover by geographical market, 2019 Breakdown of EBITDA by geographical market

Latam Latam 7% 9% Spain Spain 27% Italy 29% 18% Benelux 28%

Central Europe 23% Benelux Italy 23% Central Europe 25% 12%

Source: Company reports Source: Company reports

Detailed credit consideration The coronavirus outbreak will slow down revenue growth significantly and is likely to weaken NH Hotel's credit quality in the next 12-18 months The G-20 economies will experience an unprecedented shock in the first half of this year and will contract in 2020 as a whole, before picking up in 2021. We expect G-20 real GDP to contract by 0.5% in 2020, followed by a pickup to 3.2% in 2021. Nevertheless, downside risks to growth remain sizable. On a positive note, fiscal and monetary authorities are increasingly stepping up the level of support to their economies to avert permanent damage to households and businesses. Globally, authorities are adopting important policy measures such as income guarantees and regulatory forbearance in an effort to reduce the risk of simultaneous defaults, weakening financial stability. We expect NH Hotel to benefit from some of these support measures, which will help preserve cash.

We expect broad tourism trends to suffer and most operating metrics, such as ADR, Rev PAR and occupancy, to weaken — NH Hotel will be no exception to this. Lodging businesses rely on tourism and business travel, which are reflective of the broad levels of economic activity captured in GDP growth.

We forecast a contraction for most of the major economies in the euro area, including Germany, France, Spain and Italy. We expect the Spanish economy, which represents 26% of the company's portfolio (EBITDA basis) to contract by -1.8% in 2020 and grow by 2.5% in

4 28 April 2020 NH Hotel Group S.A.: Update following placement of B1 CFR under review for possible downgrade MOODY'S INVESTORS SERVICE CORPORATES

2021. NH Hotels second largest market Italy (52 hotels) is expected to decline by almost 3% in 2020 and then grow by 2% in 2021. In Germany, another large market for NH Hotel (56 hotels), the GDP is likely to decline 3.0% in 2020 and grow 2.5% in 2021.

Exhibit 5 We expect good growth in most European economies Economies by real GDP growth (%)

2017 2018 2019 2020F 2021F 4

3

2

1

0

-1

-2

-3

-4 G-20 Advanced US Euro area Japan Germany UK France Italy Canada Australia Korea Spain Source: Moody's Investors Service

In Latin America, the macroeconomic scenario is slightly more mixed, with Brazil, a feeder market, recovering and likely to decline by 1.6% in 2020 and grow by 2.7% in 2021 following the stable growth of 0.9% in 2019. However, Mexico and Chile are likely to decline at higher rates than in 2019 with expected GDP growth of -3.7% and -2.4% in 2020 followed by 0.9% and 2.5% growth in 2021, while Argentina's GDP growth has turned negative, at -2.5% 2019, and is likely to decline by 3.9% in 2020 before growing by 1.1% in 2021. Colombia is performing better than in 2019, with GDP growth expected at 3.3% in 2020. We view NH Hotel’s European exposure as largely stable and growing gradually; Latin America promises more growth but is also more risky.

Exhibit 6 Our forecast for emerging markets is positive although more mixed than for advanced Economies by real GDP growth (%)

2017 2018 2019 2020F 2021F 9

7

5

3

1

-1

-3 G-20 Emerging China India Brazil Russia Mexico Indonesia Turkey Saudi Arabia Argentina South Africa G-20 All Source: Moody's Investors Service

Successful completion of its strategic turnaround plan totaling €325 million, resulting in improved portfolio quality, stronger KPIs and increased profitability Following the completion of its strategic turnaround plan and before the coronavirus outbreak, we had expected NH Hotel to continue to grow the KPIs and profitability of its businesses as the performance uplift from the portfolio repositioning is fully reflected in the profit and loss. However, the KPIs will weaken during 2020 before recovering slowly in 2021. Between 2014 and 2019, NH Hotel spent about €325 million repositioning its owned and leased hotel portfolio and renegotiating its hotel leases toward more variable structures and away from loss-making assets. The investment split includes 50% for owned hotels and 50% for leased hotels.

5 28 April 2020 NH Hotel Group S.A.: Update following placement of B1 CFR under review for possible downgrade MOODY'S INVESTORS SERVICE CORPORATES

Renegotiation efforts with 65% focused on converting hotels into the NH Collection category. The return on this investment can best be seen in NH Hotel's positive KPI trend.

Exhibit 7 NH Hotel's KPIs showed strong improvement since the commencement of the repositioning program in 2014

ADR RevPAR Occupany 100 80%

90 70% 80 60% 70 50% 60

50 40% € Million € 40 30% 30 20% 20 10% 10

0 0% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Source: Company reports

Exhibit 8 Portfolio by contract Asset heavy portfolio, which improves unencumbered assets and liquidity, and access to capital

Franchised Managed 2% 15%

Owned 21%

Leased 62%

Source: Company reports

The company improved its brand definitions and standardized them across the portfolio, which was important for a business built through a series of regional acquisitions. NH Hotel focuses on the urban business and small meeting market in the midscale, upscale and upper upscale segments. NH Hotel has established clear marketing and service guidelines for each of its brands, along with an amenity package and pricing strategy. This is an improvement over its prior decentralized operating approach because it keeps brands clear and consistent in the customers’ minds. Coupled with new softgoods and refurbishments of properties, the new, stricter branding definition has allowed NH Hotel to upscale its competitive set and to perform strongly against it.

6 28 April 2020 NH Hotel Group S.A.: Update following placement of B1 CFR under review for possible downgrade MOODY'S INVESTORS SERVICE CORPORATES

Exhibit 9 NH Hotel's brand distribution

Other Brands (Anantara, Tivoli, Avani) NHOW 5% 3%

NH Collection 24%

NH Hotels 68%

Source: Company reports

Along with refining the definitions of its brands, NH Hotel is making selective investments in marketing on a country-by-country basis, establishing key account management and relaunching its loyalty program. The company is focused on driving net ADR and profitability. To that end, it is reinforcing direct channels (online, mobile, central reservations, hotels) and optimizing indirect channels (tour operators, OTAs, agencies), although OTAs remain important in attracting international clientele.

The branding, pricing and marketing efforts are underpinned by improvements to internal IT and HR systems, which are also included in the strategic plan. The new systems have allowed NH Hotel to get better information dynamically across its portfolio and adjust its pricing and staffing levels accordingly while ensuring consistency with brand profiles and marketing initiatives. The results of these efforts are reflected in positive trends in its TripAdvisor scores.

Exhibit 10 Favorable shift in NH Hotel's TripAdvisor and Google Reviews rankings

TripAdvisor Google Reviews 8.6 8.6

8.5

8.4 8.4 8.4 8.4 8.4

8.3 8.3 8.3

8.2 8.2

8 2014 2015 2016 2017 2018 2019 Source: Company reports

In addition to operational KPIs, NH Hotel's revenue, EBITDA and flow through strengthened in part as a result of the efficiency program, which contributed €11 million in savings in 2017 and another €5 million in 2018. Additional cost control measures were implemented in 2019.

7 28 April 2020 NH Hotel Group S.A.: Update following placement of B1 CFR under review for possible downgrade MOODY'S INVESTORS SERVICE CORPORATES

Exhibit 11 NH Hotel's revenue, EBITDA and flow through have improved as a result of the repositioning program

Net Sales/Revenue EBITDA Flow-Through to EBITDA 1,800 80% 53% 45% 60% 1,600 40% 31% 40% 1,400 31% 20% 1,200 0% 1,000 -20%

€ Million € 800 -40% -60% 600 -80% 400 -100% 200 -122% -120% - -140% 2014 2015 2016 2017 2018 2019

Data as reported by the company. Source: Company management reports

Successful refinancing and conversion bolstering leverage and coverage, which means NH Hotel is solidly positioned in view of the coronavirus situation In addition to strengthening its performance, NH Hotel Group has also bolstered its balance sheet with an issuance in September 2016 of a €285 million secured note due 2023 and a €115 million tap of the same bond in March 2017. The proceeds of these offerings, together with cash on balance sheet, allowed the company to address a number of near-term maturities. NH Hotel's average debt maturity rose to 4.2 years as of year-end 2019 from 3.1 years as of 31 December 2015. The refinancing has also allowed NH Hotel to reduce its cost of debt to 3.6% from 4.7% as of 31 December 2016 by paying down in 2017 €100 million of Bond 2019 and in 2018 €43.2 million of the 3.75% bond due 2023.

With growth in EBITDA as a result of strengthening operations and the company's successful refinancing efforts, NH Hotel’s leverage declined from over 9x in 2012 to about 4.7x as of December 2019. In December 2019, Moody's-adjusted debt/EBITDA climbed to 4.7x, which is predominantly attributable to the introduction of IFRS 16. Specifically, the adoption of IFRS 16 standards resulted in an increase in reported debt by €2.1 billion. We expect, as a result of the coronavirus outbreak, that debt/EBITDA will increase but predominantly because of a significant weakening in EBITDA — and not because of debt — to around 5.8x to 13.5x within the next 12-18 months (all metrics include Moody's standard adjustments).

In tandem with the decline in its leverage, NH Hotel's interest coverage increased to 2.4x in 2019 from 0.7x in 2014 because of the reduction in the cost of debt and increase in profitability. The improvements in the credit metrics reflect the stronger margins achieved by NH Hotel as part of its turnaround by focusing on ADR growth supported by the higher quality of its portfolio and improved customer experience.

On 9 May 2018, NH Hotel announced its decision to exercise the early redemption at the option of the issuer, effectively converting the note into equity. The requirements for optional redemption were fulfilled on 30 April 2018 when the stock traded at or above 130% of the strike price of €4.919 per share (€6.395) for 20 trading sessions out of 30 consecutive trading sessions. This decreased NH Hotel's leverage further and strengthened its coverage following this conversion.

Macroeconomic, currency and repatriation risks associated with Latin American operations, although offset by upside potential NH Hotel Group operates 57 hotels in five Latin American countries (Argentina, Chile, Columbia, Ecuador and Mexico), which contributed 7% of revenue and 9% of EBITDA in 2019. The company faces an unfavorable foreign-exchange environment in some of its Latin American markets, such as Mexico. In addition, the projected growth for Argentina and Mexico is modest. Repatriation of funds from some of the Latin American countries could also be a challenge, though not significant for NH Hotel Group at present.

In 2015, NH Hotel augmented its Latin American holdings with a €65.6 million acquisition (net of a hotel disposal in Bogota) of Hoteles Royal, a family-owned business encompassing 20 hotels and 2,257 rooms in Colombia, Chile and Ecuador, along with a development parcel in Panama. NH Hotel has rolled out some of the operational enhancements it has implemented in Europe to

8 28 April 2020 NH Hotel Group S.A.: Update following placement of B1 CFR under review for possible downgrade MOODY'S INVESTORS SERVICE CORPORATES

its Latin American portfolio and envisions additional profitable growth in the region based on the management model and without significant G&A growth.

Acquisition from new major shareholder might have strategy and financial policy implications In October 2018, Minor International, a Thai hospitality company, launched a mandatory tender offer for all outstanding shares of NH Hotel Group S.A. following its acquisition of about 46% of NH Hotel's shares primarily from HNA Group and Oceanwood Capital Management Limited. Upon the conclusion of the tender offer on 26 October 2018, Minor owned 94.1% of NH Hotel's share capital, which is significantly above its 50%-55% ownership target. Minor's takeover of NH Hotel Group is not likely to change the company's strategy or financial profile on a short-term basis and therefore does not affect NH Hotel's current rating. However, as the financing structure and the overall strategy for the combined company is evolving, there is possibility of uncertainties arising that might need to be addressed. Among the options for the new major shareholder will be the divestment of a stake in NH Hotel to a strategic investor to recycle Minor International's capital through asset sale.

Minor International is a global company focused on hospitality, restaurants and lifestyle brands distribution. Minor's hotel portfolio includes 535 hotels (including NH) in 57 countries across Asia-Pacific, the Middle East, Africa, Europe and the Americas. Minor is also one of Asia’s largest restaurant companies with over 2,300 outlets in 26 countries and one of Thailand’s largest distributors of lifestyle brands and contract manufacturers. In 2019, Minor generated revenue of €1.8 billion excluding NH contribution of €1.7 billion . Liquidity analysis NH Hotel's is entering the coronavirus situation with solid liquidity NH Hotel has responded to the crisis with the temporary closing of hotels in all the geographies, cutting administrative costs, opting for short-time temporary layoff of staff & work time reduction and reducing capital spending to preserve cash. We also expect support measures from governments to help it to significantly reduce its staff costs from the second quarter onward. NH Hotel had significant levels of liquidity as of 31 December 2019, including €289 million of cash, reinforced by the recently undrawn revolving credit facility of €250 million and bilateral undrawn credit facilities of €53 million. NH Hotel has drawn the €250 million revolving credit facility and 24.5 million of bilateral credit facilities in March to strengthen its cash balance, reaching a cash balance close to 500M by end of March. With total available funds representing around 35% of revenue, NH Hotel is entering the current crisis with solid liquidity. Additionally, NH Hotel has a significant pool of fully owned unencumbered assets amounting to €729 million as per the last appraisal date, which increases financial flexibility and could be used for secured borrowing. Under normal market conditions, this level of liquidity would be considered strong and we consider NH Hotel's liquidity capable of supporting the company for a period of partial or total fall in occupancy.

However, a more severe downside scenario with significant pressure on revenue and no material recovery beyond Q2 2020 will result in significant negative cash flow in 2020, weakening credit metrics, and will put severe pressure on liquidity. Additionally, the company has drawn the €250 million revolving credit facility and about 50% of €54 million of other available credit lines, which will result in a higher leverage and raises questions regarding bank willingness to waive or reset financial covenants included in the documentation. The company has no maturities of size until 2023, with the exception of the RCF that matures in 2021.

NH Hotel faces certain unfavorable foreign-exchange trends in its Latin American businesses (especially Argentina). While repatriation of funds would crystallize a significant loss at present (in case of asset disposal in the region), these businesses are self-funding and require no cash inflow from the parent, allowing NH Hotel to maintain its portfolio without affecting its near-term cash flow. The Latin American business contributed 9% of EBITDA in 2019.

NH Hotel introduced a €0.05/share dividend in 2016 (payable in 2017), for the first time since before the financial crisis. The company increased it by €0.05/share in both 2017 and 2018. In 2018, the total paid dividend was €39.2 million, including new share capital after conversion of the convertible note, and in 2019, €59 million. Starting in 2019 (payable in 2020), NH Hotel expects to pay out about 50% of its net recurring income unless it is postponed because of the coronavirus outbreak.

9 28 April 2020 NH Hotel Group S.A.: Update following placement of B1 CFR under review for possible downgrade MOODY'S INVESTORS SERVICE CORPORATES

Exhibit 12 Estimation of NH Hotel's sources and uses of liquidity for the next 18 months

900

800

700

600 Cash

500

400 CFO € Million € Dividends Cash Interest 300 Commited Bank Line 200 RCF Capex 100

0 Sources Uses Source: Company data as reported and Moody's Investors Service estimates

Exhibit 13 NH Hotel has a middle-term maturity profile

Bond 2023 Subordinated Loans Other Loans Other Secured Loans Undrawn RCF Commited Bank Line 450

400

350

300

250 € Million 200

150

100

50

0 2020 2021 2022 2023 2024 >2024 Source: Company data

ESG considerations We incorporate the impact of environmental, social and governance (ESG) factors in our assessment of companies' credit quality. In the case of NH Hotel, environmental and social factors have a moderate impact on its credit quality, in line with the industry (see our environmental and social heat maps for sector exposures). The company's governance and financial policies are important elements in our rating assessment.

Environmental considerations: We expect NH Hotel, alongside the lodging industry, to have a low environmental risk with some exposure to potential natural disasters and regulations around water usage at its properties. There is some exposure to carbon taxes or behavioral changes of travel as many customers fly in or drive to hotels.

Social considerations: The lodging sector has low exposure to social risk given companies' ability to adjust and adapt to evolving social issues. Nonetheless, the industry does have exposure to data security and data privacy issues, competition from alternative lodging options and reliance on human capital. Changing consumer preferences and social trends over time are also considerations for the sector.

Governance considerations: The company has a majority (94%) owner, Minor International. Lack of clarity regarding corporate governance has been ameliorated by a recent track record of successful operations and improved transparency to prevent and solve conflicts of interest and related-party transactions.

10 28 April 2020 NH Hotel Group S.A.: Update following placement of B1 CFR under review for possible downgrade MOODY'S INVESTORS SERVICE CORPORATES

Structural considerations The senior secured notes due 2023 are rated Ba3, one notch above the CFR. In assigning the instrument rating, we have applied our Loss Given Default methodology and assumed a 50% recovery rate, reflecting the presence of both bond and bank debt in the capital structure. In addition, we have ranked the senior secured notes and the revolving credit facility ahead of €42 million of unsecured debt, as well as €253 million of fixed lease commitments. The one-notch difference between the instrument and the CFR reflects support from a security package including real assets and a buffer from large lease rejection claims. The notes due 2023 are secured on 10 hotels in the Netherlands, pledges of shares in nine further hotels (one in the Netherlands and eight in Belgium), as well as share pledge in NH Italia SpA, a wholly owned subsidiary. Duff & Phelps' appraisal dated July June 2018 2019 valued the collateral at about €1.6 billion. The one-notch uplift for the senior secured debt also incorporates NH Hotel's low current LTV of 38% against collateral of real property assets and share pledge of NH Italia after the draw down of the secured RCF, and the company's current plans not to intensively reduce collateral coverage outside of asset rotation transactions. Rating methodology and scorecard factors

Exhibit 14 Rating factors NH Hotel Group S.A.

Current Moody's 12-18 Month Forward View Business and Consumer Service Industry Scorecard [1][2] FY 12/31/2019 As of 3/26/2020 [3] Factor 1 : Scale (20%) Measure Score Measure Score a) Revenue (USD Billion) $1.9 Ba $1.2 - $1.7 B Factor 2 : Business Profile (20%) a) Demand Characteristics Ba Ba Ba Ba b) Competitive Profile Ba Ba Ba Ba Factor 3 : Profitability (10%) a) EBITA Margin 15.7% Ba -12.8% - 10.6% Ca Factor 4 : Leverage and Coverage (40%) a) Debt / EBITDA 4.7x B 5.8x - 13.5x Ca b) EBITA / Interest 2.4x B 0.2x - 1.5x Caa c) RCF / Net Debt 14.7% B 0.4% - 13.5% Caa Factor 5 : Financial Policy (10%) a) Financial Policy Ba Ba Ba Ba Rating: a) Scorecard-Indicated Outcome Ba3 B3 b) Actual Rating Assigned B1

[1] All ratios are based on 'Adjusted' financial data and incorporate Moody's Global Standard Adjustments for Non-Financial Corporations. [2] As of 12/31/2019. Source: Moody's Financial Metrics™ [3] This represents Moody's forward view; not the view of the issuer; and unless noted in the text, does not incorporate significant acquisitions and divestitures. Source: Moody's Investors Service

11 28 April 2020 NH Hotel Group S.A.: Update following placement of B1 CFR under review for possible downgrade MOODY'S INVESTORS SERVICE CORPORATES

Appendix

Exhibit 15 Peer comparison NH Hotel Group S.A. Hilton Worldwide Holdings Grupo Posadas, S.A.B. de C.V Radisson Hospitality AB

B1 RUR-DNG Ba1 RuR-DNG B2 RUR-DNG B1 RuR-DNG

FYE FYE FYE FYE FYE FYE FYE FYE LTM FYE FYE FYE (in USD millions) Dec-17 Dec-18 Dec-19 Dec-17 Dec-18 Dec-19 Dec-17 Dec-18 Sep-19 Dec-17 Dec-18 Dec-19 Revenue $1,747 $1,905 $1,912 $3,249 $3,610 $3,718 $426 $412 $433 $1,093 $1,133 $1,099 EBITDA $572 $673 $612 $1,810 $2,031 $2,157 $100 $86 $59 $355 $383 $183 Total Debt $2,737 $2,342 $2,878 $8,284 $8,741 $9,384 $531 $532 $604 $1,448 $1,565 $785 Cash & Cash Equiv. $94 $301 $322 $570 $403 $538 $71 $139 $82 $9 $286 $264 EBITA Margin 12.1% 17.3% 15.7% 47.3% 50.5% 53.7% 14.7% 12.6% 4.2% 11.2% 14.9% 9.6% EBITA / Int. Exp. 1.4x 1.8x 2.4x 3.6x 4.1x 4.3x 1.5x 1.2x 0.5x 1.7x 1.5x 2.3x Debt / EBITDA 4.5x 3.6x 4.7x 4.6x 4.3x 4.4x 5.5x 6.3x 10.5x 3.8x 4.2x 4.3x RCF / Net Debt 17.0% 20.2% 14.7% 11.0% 13.6% 13.2% -12.1% 8.2% 11.4% 18.5% 18.7% 23.6% FCF / Debt 2.8% 1.7% -1.4% 7.4% 11.7% 11.8% -7.8% -7.9% -7.4% -0.8% 2.6% -13.7%

All figures & ratios calculated using Moody’s estimates & standard adjustments. FYE = Financial Year-End. Source: Moody’s Financial Metrics™

Exhibit 16 NH Hotel Group S.A.'s adjusted debt breakdown FYE FYE FYE FYE FYE FYE (in EUR Millions) Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 As Reported Debt 811 891 864 741 421 2,524

Pensions 14 14 17 16 17 29 Operating Leases 1,361 1,413 1,440 1,509 1,597 0 Non-Standard Adjustments 44 24 22 13 13 11

Moody's-Adjusted Debt 2,229 2,342 2,343 2,279 2,049 2,564

All figures are calculated using Moody’s estimates and standard adjustments. Source: Moody’s Financial Metrics™

Exhibit 17 NH Hotel Group S.A.'s adjusted EBITDA breakdown FYE FYE FYE FYE FYE FYE (in EUR Millions) Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 As Reported EBITDA 116 135 203 233 335 536

Operating Leases 272 283 288 302 319 0 Interest Expense – Discounting -3 0 0 0 0 0 Unusual -17 1 -51 -28 -86 10 Non-Standard Adjustments 1 1 0 0 0 0

Moody's-Adjusted EBITDA 369 419 439 507 570 546

All figures are calculated using Moody’s estimates and standard adjustments. Source: Moody’s Financial Metrics™

12 28 April 2020 NH Hotel Group S.A.: Update following placement of B1 CFR under review for possible downgrade MOODY'S INVESTORS SERVICE CORPORATES

Exhibit 18 Overview of key metrics for NH Hotel Group S.A.

FYE FYE FYE FYE FYE (In USD Millions) 2015 2016 2017 2018 2019 INCOME STATEMENT Revenue 1,528 1,602 1,747 1,905 1,912 EBITDA 466 486 572 673 612 EBIT 151 138 187 301 281 Interest Expense 173 147 147 184 127 BALANCE SHEET Cash & Cash Equivalents 84 144 94 301 322 Total Debt 2,544 2,471 2,737 2,342 2,878 Net Debt 2,460 2,327 2,642 2,041 2,557 CASH FLOW Funds from Operations (FFO) 278 373 443 473 444 Cash Flow from Operations (CFO) 240 365 431 480 523 Capital Expenditures (Capex) 392 381 339 392 496 Dividends 1 21 47 68 Retained Cash Flow (RCF) 278 372 422 426 376 RCF / Debt 10.7% 14.3% 16.4% 17.6% 13.1% Free Cash Flow (FCF) -152.9 -17.5 71.1 40.8 -40.8 FCF / Debt -5.9% -0.7% 2.8% 1.7% -1.4% PROFITABILITY % Change in Sales (YoY) 10.4% 5.2% 6.8% 4.4% 5.9% EBIT Margin % 9.9% 8.6% 10.7% 15.8% 14.7% EBITDA Margin % 30.5% 30.3% 32.8% 35.3% 32.0% INTEREST COVERAGE EBIT / Interest Expense 0.9x 0.9x 1.3x 1.6x 2.2x EBITA / Interest Expense 1.0x 1.1x 1.4x 1.8x 2.4x EBITDA / Interest Expense 2.7x 3.3x 3.9x 3.7x 4.8x LEVERAGE Debt / EBITDA 5.6x 5.3x 4.5x 3.6x 4.7x Net Debt / EBITDA 5.4x 5.0x 4.3x 3.1x 4.2x Debt / Book Capitalization 64% 64% 64% 55% 64%

All figures are calculated using Moody’s estimates and standard adjustments. Source: Moody’s Financial Metrics™

Ratings

Exhibit 19 Category Moody's Rating NH HOTEL GROUP S.A. Outlook Rating(s) Under Review Corporate Family Rating B11 Senior Secured -Dom Curr Ba3/LGD31 [1] Placed under review for possible downgrade on March 24, 2020. Source: Moody's Investors Service

13 28 April 2020 NH Hotel Group S.A.: Update following placement of B1 CFR under review for possible downgrade MOODY'S INVESTORS SERVICE CORPORATES

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14 28 April 2020 NH Hotel Group S.A.: Update following placement of B1 CFR under review for possible downgrade MOODY'S INVESTORS SERVICE CORPORATES

Contacts CLIENT SERVICES

Anke Rindermann +49.69.70730.788 Americas 1-212-553-1653 Associate Managing Asia Pacific 852-3551-3077 Director [email protected] Japan 81-3-5408-4100 EMEA 44-20-7772-5454

15 28 April 2020 NH Hotel Group S.A.: Update following placement of B1 CFR under review for possible downgrade