Hilton Grand Vacations Announces Pricing of Senior Secured Notes
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Insights
The pricing of Hilton Grand Vacations Inc.'s $900 million senior secured notes is a significant financial event, indicative of the company's strategic moves to fund its acquisition endeavors, notably the purchase of Bluegreen Vacations Holding Corporation. The 6.625% interest rate attached to these notes, maturing in 2032, reflects the credit risk and market conditions at the time of the issuance. Investors and analysts alike should consider the yield in comparison to current market rates for similar maturity and risk profiles, as it may signal the company's cost of capital and financial health.
Furthermore, the structuring of the notes as senior secured debt provides investors with a first-priority claim on the company's assets, which is a critical consideration for risk assessment. The collateral backing these notes, being substantially all assets of the issuing entities and guarantors, suggests a strong protective measure for note holders, yet it also indicates the degree of leverage the company is willing to undertake. This move may affect the company's balance sheet and credit ratings, which in turn could influence its stock price and cost of future debt.
The acquisition of Bluegreen Vacations by Hilton Grand Vacations represents a consolidation within the vacation ownership sector, which could potentially lead to increased market share and economies of scale for HGV. The acquisition's financing through this note offering suggests confidence in the synergy potential and future cash flows expected from the merger. Market participants should assess how this acquisition aligns with industry trends, such as the growing demand for vacation and timeshare properties and the ability of HGV to integrate BVH's operations effectively.
Additionally, the timing and successful closure of the offering and acquisition will be crucial in evaluating HGV's operational efficiency and deal-making prowess. The use of proceeds to repay existing debt and cover related transaction costs is a routine strategy to streamline post-acquisition financials, but it also requires careful monitoring of the new debt levels and the company's ability to service this debt without affecting operational performance.
The legal intricacies of the note offering, including the escrow arrangement and the exemption from registration under the Securities Act, are essential for stakeholders to understand. The exemption under Rule 144A allows for a private offering to qualified institutional buyers, which can expedite the fundraising process but also limits the pool of potential investors to a more sophisticated audience. The escrow provisions ensure that the funds are used expressly for the intended purpose, providing a safeguard for investors.
The legal structure set up for the issuance, involving the creation of escrow entities that will merge with the surviving issuers upon the acquisition's completion, is a strategic move to facilitate the transaction. Stakeholders should be aware of the legal obligations and protections associated with the notes, including the guarantees from HGV and its subsidiaries, which offer additional assurance of repayment but also reflect on the company's legal commitments post-acquisition.
The notes will mature on Jan. 15, 2032. The Offering is expected to close on Jan. 17, 2024, subject to customary closing conditions.
The private Offering is part of the financing for the Company’s proposed acquisition (the “Acquisition”) of Bluegreen Vacations Holding Corporation (“BVH”) and is exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”). To the extent the Offering does not close concurrently with the Acquisition, Hilton Grand Vacations Borrower Escrow, LLC and Hilton Grand Vacations Borrower Escrow, Inc., which were created solely to issue the notes and for other financing transactions related to the Acquisition, will deposit the gross proceeds of the Offering into a segregated escrow account until the date that certain escrow release conditions are satisfied. Upon the closing of the Acquisition, Hilton Grand Vacations Borrower Escrow, LLC and Hilton Grand Vacations Borrower Escrow, Inc. will merge with and into Hilton Grand Vacations Borrower LLC and Hilton Grand Vacations Borrower Inc., respectively, each a wholly-owned subsidiary of the Company, and, to the extent the Offering does not close concurrently with the Acquisition, the escrow proceeds will be released. The surviving issuers will thereupon assume the obligations under the notes. To the extent the Offering closes concurrently with the Acquisition, the surviving issuers will issue the notes, and the escrow provisions described above will not apply. Upon the closing of the Acquisition, the notes will be guaranteed by Hilton Grand Vacations Inc., Hilton Grand Vacations Parent LLC, also a wholly-owned subsidiary of the Company, and certain of Hilton Grand Vacations Borrower LLC’s existing and future subsidiaries (collectively, the “guarantors”). The notes and the related guarantees will be secured on a first-priority basis by substantially all assets of the surviving issuers and the guarantors, which assets also secure the Company’s senior secured credit facilities, subject to certain exceptions.
On Nov. 6, 2023, HGV announced it would acquire BVH for
Upon the closing of the Acquisition and release of the net proceeds of the Offering from the escrow account (if applicable), HGV intends to use the net proceeds from the Offering to (i) finance the consummation of the Acquisition, (ii) repay certain outstanding indebtedness and (iii) pay related fees, costs, premiums and expenses in connection with these transactions.
The notes and related guarantees have not been, and will not be, registered under the Securities Act or the securities laws of any other jurisdiction and may not be offered or sold in
This press release does not constitute an offer to sell or the solicitation of an offer to buy the notes and related guarantees and shall not constitute an offer, solicitation or sale of any securities in any jurisdiction in which such offer, solicitation or sale would be unlawful. This press release is being issued pursuant to and in accordance with Rule 135c under the Securities Act.
Forward Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements convey management’s expectations as to the Company’s future, and are based on management’s beliefs, expectations, assumptions and such plans, estimates, projections and other information available to management at the time the Company makes such statements. Forward-looking statements include all statements that are not historical facts, and may be identified by terminology such as the words “outlook,” “believe,” “expect,” “potential,” “goal,” “continues,” “may,” “will,” “should,” “could,” “would,” “seeks,” “approximately,” “projects,” “predicts,” “intends,” “plans,” “estimates,” “anticipates,” “future,” “guidance,” “target,” or the negative version of these words or other comparable words, although not all forward-looking statements may contain such words. The forward-looking statements contained in this press release include statements related to the Company’s revenues, earnings, taxes, cash flow and related financial and operating measures, and expectations with respect to future operating, financial and business performance and other anticipated future events and expectations that are not historical facts, including related to the proposed transaction between the Company and BVH.
The Company cautions you that its forward-looking statements involve known and unknown risks, uncertainties and other factors, including those that are beyond the Company’s control, which may cause the actual results, performance or achievements to be materially different from the future results. Any one or more of these risks or uncertainties, including those related to the proposed transaction between the Company and BVH, could adversely impact the Company’s operations, revenue, operating profits and margins, key business operational metrics, financial condition or credit rating. For a more detailed discussion of these factors, see the information under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s most recent Annual Report on Form 10-K, which may be supplemented and updated by the risk factors in the Company’s quarterly reports (including, without limitation, the Company’s Quarterly Report on Form 10-Q for the quarter ended Sept. 30, 2023), current reports and other filings the Company makes with the Securities and Exchange Commission.
The Company’s forward-looking statements speak only as of the date of this press release or as of the date they are made. The Company disclaims any intent or obligation to update any “forward looking statement” made in this press release to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time.
About Hilton Grand Vacations Inc.
Hilton Grand Vacations Inc. (NYSE:HGV) is recognized as a leading global timeshare company and is the exclusive vacation ownership partner of Hilton. With headquarters in
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Investor Contact:
Mark Melnyk
407-613-3327
mark.melnyk@hgv.com
Media Contact:
Lauren George
407-613-8431
lauren.george@hgv.com
Source: Hilton Grand Vacations Inc.
FAQ
What is the recent offering made by Hilton Grand Vacations Inc.?
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Are the notes and related guarantees registered under the Securities Act or the securities laws of any other jurisdiction?
