Travel + Leisure Co. Successfully Reprices and Upsizes Secured Term Loan B Facility to $598 Million

Rhea-AI Summary

Travel + Leisure Co. (NYSE:TNL) announced the closing of the Fifth Amendment to its Credit Agreement, establishing a $598 million 2023 Term Loan B Facility. This facility refinanced $298 million of outstanding borrowings and included additional borrowings of $300 million. The company plans to use the net proceeds to repay its outstanding $300 million 5.65% secured notes due April 2024 and pay related fees and expenses. The 2023 Term Loan B Facility matures on December 14, 2029, and is priced at SOFR plus 3.25% plus a 0.10% SOFR Adjustment, which is 75 basis points lower than the 2022 Incremental Term Loan facility. $298 million of the borrowings priced at par, while the additional $300 million was subject to an original issue discount of 99.75%. The floor rate remains at 0.50%. Mike Hug, CFO of Travel + Leisure Co., expressed satisfaction with the results, highlighting the company's strong appeal to investors.

Insights

Financial Analyst

The announcement by Travel + Leisure Co. regarding the completion of the Fifth Amendment to its Credit Agreement, introducing a new 2023 Term Loan B Facility, is a strategic financial maneuver. The refinancing of existing debt with a lower interest rate (SOFR plus 3.25%) indicates a proactive approach to debt management and capital structure optimization. The additional borrowings, which contribute to the repayment of other outstanding securities, reflect the company's liquidity planning and its ability to negotiate favorable terms in the credit market.

From a financial perspective, the reduction in borrowing costs by 75 basis points is significant, as it can lead to material interest expense savings over the life of the loan. This could positively affect the company's net income and cash flow, potentially enhancing its financial health and investment appeal. The transaction also extends the maturity of the company's debt profile, which can provide more flexibility in managing future capital needs and reduce short-term liquidity risk.

However, one must consider the original issue discount on the additional $300 million, which was issued at 99.75%. This implies an upfront cost that will need to be amortized over the term of the loan, slightly increasing the effective interest rate. Investors should also be aware of the SOFR Adjustment and floor rate, which are mechanisms to protect lenders from interest rate fluctuations and ensure a minimum yield, respectively.

Debt Market Analyst

The shift from a previous term loan to the new 2023 Term Loan B Facility by Travel + Leisure Co. showcases the company's ability to navigate the debt markets effectively. The transaction's structure, which includes a mix of refinanced debt and new capital, is indicative of a robust credit profile and investor confidence. The pricing of the new term loan at par for the refinanced portion and with a slight discount for the new capital suggests a healthy demand for the company's debt instruments.

It is important to analyze the broader implications of such refinancing moves on the company's cost of capital and leverage ratios. A lower cost of capital can provide a competitive edge by freeing up cash flows that can be redirected towards growth initiatives or shareholder returns. Moreover, the extended maturity date to 2029 gives Travel + Leisure Co. a longer horizon to manage its liabilities, potentially aligning with its strategic growth plans.

Market participants should monitor how the company's leverage and interest coverage ratios evolve post-transaction. These ratios are critical in assessing the company's ability to meet its debt obligations and maintain financial stability. The current economic environment, characterized by interest rate volatility, makes such refinancing activities particularly noteworthy for the company's financial strategy.

Industry Analyst

In the context of the hospitality and leisure industry, Travel + Leisure Co.'s recent financial restructuring through the 2023 Term Loan B Facility suggests an industry trend towards capital restructuring to leverage favorable credit conditions. This move may reflect a broader industry response to the post-pandemic recovery phase, where companies are looking to strengthen their balance sheets and prepare for growth opportunities.

The industry-specific implications of this refinancing could signal Travel + Leisure Co.'s confidence in its operational recovery and future revenue streams. It is also indicative of the company's strategic foresight in locking in lower interest rates before any potential rate hikes, which could be precipitated by inflationary pressures or changes in monetary policy.

This refinancing could set a precedent for other companies within the sector to reevaluate their debt structures. Stakeholders, including competitors, may observe the success of this transaction and consider similar financial strategies to optimize their own capital structures. As the industry continues to recover and adapt to the new normal, such financial agility could become increasingly valuable.

ORLANDO, Fla.--(BUSINESS WIRE)-- Travel + Leisure Co. (NYSE:TNL) announced today the closing of the Fifth Amendment to its Credit Agreement, which established $598 million of incremental term loans (the “2023 Term Loan B Facility”). The 2023 Term Loan B Facility refinanced $298 million of outstanding borrowings under the 2022 Incremental Term Loan facility and included additional borrowings of $300 million. The company expects to use net proceeds from the 2023 Term Loan B, together with available cash on hand and revolving credit facility borrowings to repay its outstanding $300 million 5.65% secured notes due April 2024 and pay related fees and expenses.

The 2023 Term Loan B Facility matures on December 14, 2029, and priced at SOFR plus 3.25% plus a 0.10% SOFR Adjustment, which is 75 basis points lower than the 2022 Incremental Term Loan facility. $298 million of the borrowings under the 2023 Term Loan B Facility priced at par, while the additional $300 million was subject to an original issue discount of 99.75%. The floor rate remains at 0.50%.

“We are very pleased with the transaction results. Successfully upsizing our 2022 Term Loan B by $300 million while achieving a 75 basis point price reduction demonstrates Travel + Leisure’s continued strong appeal to existing and new investors,” said Mike Hug, Chief Financial Officer of Travel + Leisure Co.

About Travel + Leisure Co.

As the world’s leading membership and leisure travel company, Travel + Leisure Co. (NYSE:TNL) transformed the way families vacation with the introduction of the most dynamic points-based vacation ownership program at Club Wyndham, and the first vacation exchange network, RCI. The company delivers more than six million vacations each year at 245+ timeshare resorts worldwide, through tailored travel and membership products, and via Travel + Leisure GO - the signature subscription travel club inspired by the pages of Travel + Leisure magazine. With hospitality and responsible tourism at the heart of all we do, our 19,500+ dedicated associates bring out the best in people and places around the globe. We put the world on vacation. Learn more at travelandleisureco.com.

Forward-Looking Statements

This press release includes “forward-looking statements” as that term is defined by the Securities and Exchange Commission (“SEC”). Forward-looking statements are any statements other than statements of historical fact, including statements regarding our expectations, beliefs, hopes, intentions or strategies regarding the future. In some cases, forward-looking statements can be identified by the use of words such as “expects,” and other words of similar meaning. Forward- looking statements are subject to risks and uncertainties that could cause actual results of Travel + Leisure Co. and its subsidiaries (“Travel + Leisure Co.” or “we”) to differ materially from those discussed in, or implied by, the forward-looking statements. Factors that might cause such a difference include, but are not limited to, risks associated with: the acquisition of the Travel + Leisure brand and the future prospects and plans for Travel + Leisure Co., including our ability to execute our strategies to grow our cornerstone timeshare and exchange businesses and expand into the broader leisure travel industry through new business extensions; our ability to compete in the highly competitive timeshare and leisure travel industries; uncertainties related to acquisitions, dispositions and other strategic transactions; the health of the travel industry and declines or disruptions caused by adverse economic conditions, inflation and potential recessionary impacts, unemployment rates, consumer sentiment, terrorism or acts of gun violence, political strife, war, including hostilities in Ukraine, pandemics, and severe weather events and other natural disasters; adverse changes in consumer travel and vacation patterns, consumer preferences and demand for our products; increased or unanticipated operating costs and other inherent business risks; our ability to comply with financial and restrictive covenants under our indebtedness; rising interest rates and our ability to access capital markets on reasonable terms, at a reasonable cost or at all; maintaining the integrity of internal or customer data and protecting our systems from cyber- attacks; uncertainty with respect to the scope, impact and duration of the novel coronavirus global pandemic (“COVID-19”), including resurgences, the pace of recovery, distribution and adoption of vaccines and treatments, and actions in response to the evolving pandemic by governments, businesses and individuals; the timing and amount of future dividends and share repurchases, if any; and those other factors disclosed as risks under “Risk Factors” in documents we have filed with the SEC, including in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on February 23, 2022. We caution readers that any such statements are based on currently available operational, financial and competitive information, and they should not place undue reliance on these forward-looking statements, which reflect management’s opinion only as of the date on which they were made. Except as required by law, we undertake no obligation to review or update these forward-looking statements to reflect events or circumstances as they occur.

View source version on businesswire.com: https://www.businesswire.com/news/home/20231220015229/en/

Investor Contact:

Christopher Agnew

Senior Vice President, Investor Relations

(407) 626-4050

Christopher.Agnew@travelandleisure.com



Media Contact:

Steven Goldsmith

Public Relations

(407) 626-5882

Steven.Goldsmith@travelandleisure.com

Source: Travel + Leisure Co.

FAQ

What is the recent announcement from Travel + Leisure Co. (NYSE:TNL)?

Travel + Leisure Co. (NYSE:TNL) announced the closing of the Fifth Amendment to its Credit Agreement, establishing a $598 million 2023 Term Loan B Facility.

What is the purpose of the 2023 Term Loan B Facility for Travel + Leisure Co. (NYSE:TNL)?

The facility refinanced $298 million of outstanding borrowings and included additional borrowings of $300 million. The company plans to use the net proceeds to repay its outstanding $300 million 5.65% secured notes due April 2024 and pay related fees and expenses.

When does the 2023 Term Loan B Facility for Travel + Leisure Co. (NYSE:TNL) mature?

The facility matures on December 14, 2029.

What is the pricing of the 2023 Term Loan B Facility for Travel + Leisure Co. (NYSE:TNL)?

The facility is priced at SOFR plus 3.25% plus a 0.10% SOFR Adjustment, which is 75 basis points lower than the 2022 Incremental Term Loan facility. $298 million of the borrowings priced at par, while the additional $300 million was subject to an original issue discount of 99.75%. The floor rate remains at 0.50%.