American Express Global Business Travel Announces Refinancing of its Existing Credit Facility

Rhea-AI Summary

American Express Global Business Travel (NYSE: GBTG) has announced a significant refinancing of its credit facility. The new agreement includes a $1,400 million senior secured first lien term loan maturing in 2031 and a $360 million senior secured first lien revolving credit facility maturing in 2029. Key highlights include:

- Interest rate margin reduction of ~180 bps
- Estimated interest savings of ~$25 million in 2024
- Extended term loan maturities to 2031
- Increased revolving credit facility from $50 million to $360 million
- Unchanged total debt level with focus on deleveraging

The refinancing strengthens Amex GBT's balance sheet, provides increased liquidity, and supports the company's target leverage ratio of 1.5x - 2.5x Net Debt / Adjusted EBITDA.

Positive

• Interest rate margin reduction of approximately 180 basis points
• Estimated interest savings of $25 million in 2024
• Extended term loan maturities to 2031, providing seven years of runway
• Increased revolving credit facility capacity from $50 million to $360 million
• Strengthened balance sheet and increased liquidity

Negative

• None.

Insights

Financial Analyst

American Express Global Business Travel's refinancing of its credit facility marks a significant improvement in its financial position. The 180 basis point reduction in interest rate margin is substantial, translating to an estimated $25 million in interest savings for 2024. This move demonstrates the company's proactive approach to financial management and its ability to capitalize on favorable market conditions.

The extension of the term loan maturity to 2031 provides GBTG with a seven-year runway, which is important as the company anticipates accelerated cash flow generation. This extended timeline offers stability and reduces near-term refinancing risks, allowing management to focus on strategic initiatives and growth opportunities.

The upsizing of the revolving credit facility from $50 million to $360 million is particularly noteworthy. This 620% increase in available credit significantly enhances the company's liquidity position and financial flexibility. It's a strong vote of confidence from lenders and provides a substantial safety net for potential future investments or unforeseen challenges.

While the total debt level remains unchanged, GBTG's focus on deleveraging with a target leverage ratio of 1.5x - 2.5x Net Debt / Adjusted EBITDA indicates a commitment to maintaining a healthy balance sheet. This conservative approach, coupled with the improved terms of the new facility, positions the company well for future growth and potential market volatility.

Overall, this refinancing represents a strategic win for American Express Global Business Travel, potentially improving investor confidence and setting the stage for enhanced financial performance in the coming years.

Market Research Analyst

The refinancing of American Express Global Business Travel's credit facility offers intriguing insights into both the company's position and broader market trends. The ability to secure such favorable terms - particularly the 180 basis point reduction in interest rate margin - suggests a significant improvement in GBTG's credit profile and/or a notably accommodative lending environment.

This move comes at a time when the travel industry is experiencing a robust recovery post-pandemic. The company's confidence in accelerating cash flow generation aligns with industry projections of continued growth in business travel. However, it's important to note that this sector remains sensitive to economic fluctuations and geopolitical events.

The substantial increase in the revolving credit facility, from $50 million to $360 million, is particularly telling. This sevenfold increase in available credit could indicate that GBTG is preparing for significant expansion or anticipating major market opportunities. It might also serve as a buffer against potential industry volatility, providing flexibility to navigate unforeseen challenges.

The company's target leverage ratio of 1.5x - 2.5x Net Debt / Adjusted EBITDA is in line with industry norms for stable, mature companies. This conservative approach to leverage, combined with the improved credit terms, positions GBTG favorably compared to competitors who may be carrying heavier debt loads.

Investors should watch for how GBTG utilizes this enhanced financial flexibility. Will it lead to increased market share, technological investments, or potential M&A activity? The company's strategic decisions in the coming months could provide valuable indicators of its long-term growth trajectory and the overall health of the business travel sector.

NEW YORK--(BUSINESS WIRE)-- American Express Global Business Travel, which is operated by Global Business Travel Group, Inc. (NYSE: GBTG) (“Amex GBT” or the “Company”), a leading software and services company for travel, expense, and meetings and events, today announced that it entered into an amended and restated credit agreement, which provides for a principal amount of $1,400 million senior secured first lien term loan facility, maturing on July 26, 2031, and a $360 million senior secured first lien revolving credit facility, maturing on July 26, 2029.

Transaction Highlights:

• Significant interest rate margin reduction of approximately 180 bps, with the new term loan facility priced at secured overnight financing rate (SOFR) +3.00% (99.75 original issue discount).
• Delivering estimated interest savings of approximately $25 million in 2024 versus 2023, including the refinancing and previously achieved interest savings from lowered leverage ratio.
• Strengthens balance sheet by extending near-term term loan maturities to 2031, providing seven years of runway as cash flow generation accelerates.
• Upsized revolving credit facility capacity from $50 million to $360 million (currently undrawn), providing the Company with increased liquidity and flexibility.
• Total debt level unchanged, and focus remains on continued deleveraging, with target leverage ratio of 1.5x – 2.5x Net Debt / Adjusted EBITDA.

The term loans were drawn in full on July 26, 2024, and the proceeds were used to repay in full the principal amount of all term loans and other outstanding obligations (including related fees and expenses) under the Company’s previously existing principal credit facility. The $360 million of available borrowings under the new revolving credit facility may be drawn in the future for working capital needs and other general corporate purposes, subject to customary conditions similar to those in the Company’s previously existing principal credit facility.

The term loans bear interest based on SOFR, plus a margin of 3.00% per annum. Borrowings under the revolving credit facility are subject to interest based on SOFR, plus a margin of 2.75% per annum.

About American Express Global Business Travel

American Express Global Business Travel is the world’s leading B2B travel platform, providing software and services to manage travel, expenses, and meetings & events for companies of all sizes. We have built the most valuable marketplace in B2B travel to deliver unrivalled choice, value and experiences. With travel professionals in more than 140 countries, our customers and travelers enjoy the powerful backing of American Express Global Business Travel.

Visit amexglobalbusinesstravel.com for more information about Amex GBT. Follow @amexgbt on Twitter, LinkedIn and Instagram.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240726242175/en/

Investors:

Jennifer Thorington

Vice President Investor Relations

investor@amexgbt.com

Media:

Martin Ferguson

Vice President Global Communications and Public Affairs

martin.ferguson@amexgbt.com

Source: Global Business Travel Group, Inc.

FAQ

What is the new credit facility amount for American Express Global Business Travel (GBTG)?

The new credit facility for American Express Global Business Travel (GBTG) includes a $1,400 million senior secured first lien term loan facility and a $360 million senior secured first lien revolving credit facility.

How much interest savings is GBTG expecting from the refinancing in 2024?

American Express Global Business Travel (GBTG) is expecting estimated interest savings of approximately $25 million in 2024 compared to 2023, including the refinancing and previously achieved interest savings from lowered leverage ratio.

What is the new maturity date for GBTG's term loan facility?

The new maturity date for American Express Global Business Travel's (GBTG) term loan facility is July 26, 2031.

How has GBTG's revolving credit facility capacity changed with the refinancing?

American Express Global Business Travel's (GBTG) revolving credit facility capacity has increased from $50 million to $360 million with the refinancing.