Park Hotels & Resorts Inc Announces Closing of $550 Million of 7.000% Senior Notes Due 2030

Rhea-AI Summary

Park Hotels & Resorts (PK) announced the closing of a $550 million offering of 7.000% senior notes due 2030. The notes will pay interest semi-annually and mature on February 1, 2030. The net proceeds will be used to purchase and redeem all $650 million of 7.500% senior notes due 2025 through a concurrent cash tender offer and to pay related fees. Excess proceeds will be used for general corporate purposes. The offering increases the company's liquidity to $1.4 billion and extends debt maturities, with no significant maturities until 2026. The notes and guarantees were offered only to qualified institutional buyers and non-U.S. persons in offshore transactions.

Positive

• Raised $550 million through 7.000% senior notes due 2030.
• Increases liquidity position to $1.4 billion.
• Extends debt maturities, with no significant maturities until 2026.
• Uses proceeds to redeem $650 million of 7.500% senior notes due 2025.
• Reduces interest expense by refinancing higher-coupon debt.
• Demonstrates ability to access multiple debt markets.

Negative

• Incurs new debt with a 7.000% interest rate, adding to financial obligations.
• Requires payment of related fees and expenses for the offering and tender offer.
• Potential dilution of current shareholders' value due to increased debt.
• Reliance on debt markets may signal underlying financial vulnerabilities.

Insights

Financial Analyst

The issuance of $550 million in 7.000% senior notes and the securing of a $200 million unsecured term loan are significant financial maneuvers for Park Hotels & Resorts Inc. This move aims to refinance the company's existing 7.500% Senior Notes due 2025, which should be viewed as a strategic play to optimize their debt profile and improve liquidity. The company now boasts a liquidity position of $1.4 billion, implying a stronger balance sheet and reduced risk of near-term financial distress. By pushing maturities out to 2030, Park Hotels mitigates refinancing risks and interest rate exposure for several years. This proactive approach to managing debt obligations enhances financial flexibility and positions Park Hotels more favorably for future growth or downturns in the market.

However, the elevated interest rate of 7% for these new notes might be a reflection of the current high-interest-rate environment or the company's credit risk and this could impact net income negatively due to higher interest expenses in the long run. The redemption of higher-yielding notes is a positive indication of prudent financial management, but investors should remain cautious about overall leverage levels.

TYSONS, Va., May 16, 2024 (GLOBE NEWSWIRE) -- Park Hotels & Resorts Inc. (“Park” or the “Company”) (NYSE: PK) announced today that certain of its subsidiaries, Park Intermediate Holdings LLC (the “Operating Company”), PK Domestic Property LLC (“PK Domestic LLC”) and PK Finance Co-Issuer Inc. (together with the Operating Company and PK Domestic LLC, the “Issuers”), completed the previously announced offering of $550 million aggregate principal amount of 7.000% senior notes due 2030 (the “Notes”). The Notes will pay interest semi-annually in arrears, at a rate of 7.000% per year, and will mature on February 1, 2030. The Notes are guaranteed by Park, PK Domestic REIT Inc. and certain subsidiaries of the Operating Company that guarantee the Company’s credit agreement and existing senior notes due 2025, 2028, and 2029.

The Issuers intend to use the net proceeds of the offering, together with the proceeds of a new $200 million unsecured term loan that was incurred pursuant to an amendment to the Company’s existing credit agreement (the “Term Loan”) to (i) purchase all $650 million of the Issuers’ 7.500% Senior Notes due 2025 (the “2025 Notes”) that were validly tendered and accepted for purchase pursuant to the Issuers’ previously announced concurrent cash tender offer for any and all 2025 Notes (the “Tender Offer”) and to redeem any 2025 Notes not tendered in the Tender Offer and (ii) pay related fees and expenses incurred in connection with the offering, the Tender Offer and the redemption, with any remaining net proceeds used for general corporate purposes.

Thomas J. Baltimore, Jr., Chairman and Chief Executive Officer, stated, “I am extremely pleased with the execution of this offering, which, together with the Term Loan proceeds, increases our liquidity position to $1.4 billion and demonstrates our ability to access multiple debt markets to achieve our objectives to extend maturities and provide for more flexibility for our balance sheet. Upon full repayment of the 2025 Notes we will have no meaningful maturities until 2026.”

The Notes and the related guarantees were not registered under the Securities Act of 1933, as amended (the “Securities Act”), or any state securities laws. The Notes and the guarantees were not 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 and the guarantees were offered 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 does not constitute an offer to sell or 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 of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include, but are not limited to, statements related to the effects of Park’s decision to cease payments on its $725 million non-recourse CMBS loan secured by the 1,921-room Hilton San Francisco Union Square and the 1,024-room Parc 55 San Francisco – a Hilton Hotel and the lender’s exercise of its remedies, including placing such hotels into receivership, as well as Park’s current expectations regarding the performance of its business, financial results, liquidity and capital resources, including anticipated repayment of certain of its indebtedness (including the 2025 Notes), the completion of capital allocation priorities, the expected repurchase of Park’s stock, the impact from macroeconomic factors (including inflation, elevated interest rates, potential economic slowdown or a recession and geopolitical conflicts), the effects of competition, the effects of future legislation or regulations, the expected completion of anticipated dispositions, the declaration, payment and any change in amounts of future dividends and other non-historical statements. Forward-looking statements include all statements that are not historical facts, and in some cases, can be identified by the use of forward-looking terminology such as the words “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “could,” “seeks,” “projects,” “predicts,” “intends,” “plans,” “estimates,” “anticipates”, “hopes” or the negative version of these words or other comparable words. You should not rely on forward-looking statements since they involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond Park’s control and which could materially affect its results of operations, financial condition, cash flows, performance or future achievements or events.

All such forward-looking statements are based on current expectations of management and therefore involve estimates and assumptions that are subject to risks, uncertainties and other factors that could cause actual results to differ materially from the results expressed in these forward-looking statements. You should not put undue reliance on any forward-looking statements and Park urges investors to carefully review the disclosures it makes concerning risks and uncertainties under “Risk Factors” and in Park’s Annual Report on Form 10-K for the year ended December 31, 2023, as such factors may be updated from time to time in its periodic filings with the Securities and Exchange Commission (the “SEC”), which are accessible on the SEC’s website at www.sec.gov. Except as required by law, Park undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

For more information, contact:
Ian Weissman
Senior Vice President, Corporate Strategy
571-302-5591
iweissman@pkhotelsandresorts.com

FAQ

What did Park Hotels & Resorts announce on May 16, 2024?

Park Hotels & Resorts announced the closing of a $550 million offering of 7.000% senior notes due 2030.

What will the proceeds from the $550 million senior notes be used for?

The proceeds will be used to purchase and redeem $650 million of 7.500% senior notes due 2025 and to pay related fees and expenses.

How does the new debt affect Park Hotels & Resorts' liquidity?

The new debt increases Park Hotels & Resorts' liquidity position to $1.4 billion.

When do the new 7.000% senior notes mature?

The new 7.000% senior notes will mature on February 1, 2030.

What is the interest rate on the newly issued senior notes of Park Hotels & Resorts?

The newly issued senior notes have an interest rate of 7.000% per year.

How will the new senior notes affect Park Hotels & Resorts' debt maturities?

The new senior notes will extend Park Hotels & Resorts' debt maturities, with no significant maturities until 2026.

Who are the senior notes and guarantees offered to?

The senior notes and guarantees are offered only to qualified institutional buyers and certain non-U.S. persons in offshore transactions.