Hilton Announces Launch of Senior Notes Offering

Rhea-AI Summary

Hilton Worldwide Holdings Inc. (NYSE: HLT) has announced that its indirect subsidiary, Hilton Domestic Operating Company Inc., plans to offer $1.0 billion aggregate principal amount of Senior Notes due 2033. The proceeds from this offering will be used for general corporate purposes. It's important to note that these Notes will not be registered under the Securities Act of 1933 and can only be offered to qualified institutional buyers and certain non-U.S. persons in offshore transactions. This offering is being conducted under Rule 144A and Regulation S of the Securities Act.

Positive

• Raising $1.0 billion through Senior Notes offering
• Funds to be used for general corporate purposes, providing financial flexibility

Negative

• Increased debt load may impact future financial obligations

Insights

Financial Analyst

Hilton's move to issue $1 billion in senior notes due 2033 is a strategic financial decision with significant implications. This debt offering allows Hilton to capitalize on the current low-interest-rate environment, potentially locking in favorable terms for a decade. The "general corporate purposes" designation provides flexibility in fund allocation, which could include refinancing existing debt, funding expansion projects, or bolstering liquidity reserves.

However, investors should note that this increases Hilton's long-term debt obligations. The impact on the company's debt-to-equity ratio and interest coverage will be important to monitor. Given Hilton's strong brand and market position, this move likely reflects confidence in future cash flows to service the debt. The private placement nature of the offering to qualified institutional buyers suggests a targeted approach to minimize public market volatility.

Hotel Industry Expert

Hilton's substantial $1 billion note offering signals confidence in the hospitality sector's long-term prospects. Post-pandemic recovery in travel has been robust, with pent-up demand driving occupancy rates and average daily rates upward. This capital raise could potentially fund strategic initiatives such as:

• Portfolio expansion in high-growth markets
• Technological upgrades to enhance guest experiences
• Sustainability investments to meet growing ESG demands

The 2033 maturity date aligns with a long-term vision, suggesting Hilton anticipates sustained growth in the coming decade. However, the hospitality industry remains susceptible to economic cycles and unforeseen global events. Hilton's ability to navigate these challenges while leveraging this capital infusion will be critical for shareholder value creation.

Legal Expert

The structure of Hilton's note offering is noteworthy from a legal perspective. By utilizing Rule 144A and Regulation S exemptions, Hilton circumvents the need for SEC registration, streamlining the process and reducing associated costs. This approach is common for large, established companies with a strong institutional investor base.

The explicit statement that the notes are not registered under the Securities Act serves as a clear disclaimer, mitigating potential legal risks. The restriction to "qualified institutional buyers" and certain non-U.S. persons aligns with regulatory requirements and limits the investor pool, potentially affecting liquidity in the secondary market. Investors should be aware that these notes may have transferability compared to publicly registered securities.

MCLEAN, Va.--(BUSINESS WIRE)-- Hilton Worldwide Holdings Inc. (NYSE: HLT) (“Hilton”) announced today that its indirect subsidiary Hilton Domestic Operating Company Inc. (the “Issuer”) intends to offer $1.0 billion aggregate principal amount of the Issuer’s Senior Notes due 2033 (the “Notes”). The Issuer intends to use the net proceeds of the offering for general corporate purposes.

The Notes to be offered have not been and will not be registered under the Securities Act of 1933, as amended (the “Securities Act”), or any state securities laws. The Notes may not be offered or sold in the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws. The Notes will be offered by the initial purchasers only to persons reasonably believed to be “qualified institutional buyers” in reliance on the exemption from registration provided by Rule 144A under the Securities Act and to certain non-U.S. persons in offshore transactions in reliance on Regulation S under the Securities Act.

This press release is being issued pursuant to and in accordance with Rule 135c under the Securities Act, and it is neither an offer to sell nor a solicitation of an offer to buy any securities and shall not constitute an offer to sell or a solicitation of an offer to buy, or a sale of, the Notes or any other securities in any jurisdiction in which such offer, solicitation or sale would be unlawful.

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. These statements include, but are not limited to, statements related to Hilton’s expectations regarding the performance of its business, Hilton’s future financial results, liquidity and capital resources and other non-historical statements. In some cases, you can identify these forward-looking statements by the use of words such as “outlook,” “believes,” “expects,” “forecasts,” “potential,” “continues,” “may,” “will,” “should,” “could,” “seeks,” “projects,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative version of these words or other comparable words. Such forward-looking statements are subject to various risks and uncertainties including, among others, risks inherent to the hospitality industry; macroeconomic factors beyond Hilton’s control, such as inflation, changes in interest rates, challenges due to labor shortages or disputes and supply chain disruptions; the loss of key senior management personnel; competition for hotel guests and management and franchise contracts; risks related to doing business with third-party hotel owners; performance of Hilton’s information technology systems; growth of reservation channels outside of Hilton’s system; risks of doing business outside of the United States; risks associated with conflicts in Eastern Europe and the Middle East and other geopolitical events; and Hilton’s indebtedness. Accordingly, there are or will be important factors that could cause Hilton’s actual outcomes or results to differ materially from those indicated on these statements. Hilton believes these factors include, but are not limited to, those described under the section entitled “Part I—Item 1A. Risk Factors” of Hilton’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the Securities and Exchange Commission (the “SEC”), as such factors may be updated from time to time in Hilton’s periodic filings with the SEC, which are accessible on the SEC’s website at www.sec.gov. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this press release and in Hilton’s filings with the SEC. Hilton undertakes no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240902633759/en/

Investor Contact

Jill Chapman

+1 703 883 1000

Media Contact

Kent Landers

+1 703 883 3246

Source: Hilton Worldwide Holdings Inc.

FAQ

What is the size of Hilton's (HLT) new Senior Notes offering?

Hilton (HLT) is offering $1.0 billion aggregate principal amount of Senior Notes due 2033 through its indirect subsidiary, Hilton Domestic Operating Company Inc.

When will Hilton's (HLT) new Senior Notes mature?

The Senior Notes being offered by Hilton (HLT) are due in 2033.

How will Hilton (HLT) use the proceeds from the Senior Notes offering?

Hilton (HLT) intends to use the net proceeds from the Senior Notes offering for general corporate purposes.

Are Hilton's (HLT) new Senior Notes registered under the Securities Act?

No, the Senior Notes offered by Hilton (HLT) are not registered under the Securities Act of 1933 and can only be offered to qualified institutional buyers and certain non-U.S. persons in offshore transactions.