Hilton lowers debt cost by 25 bps following $9 billion refinancings

By Devika Patel

Knoxville, Tenn., May 2 – Hilton Worldwide Holdings Inc. has no “meaningful” debt maturities for the next six years, thanks to a revamping of both $4 billion of term loans and $1.5 billion of senior notes in the first quarter.

The company has now lowered its cost of debt by 25 basis points and extended its average debt maturity by about 1.5 years.

“We successfully executed over $9 billion in financial transactions in the first quarter, including amending and extending our $4 billion of term loans, refinancing our $1.5 billion of senior notes and unwinding and replacing our interest rate swap portfolio,” executive vice president and chief financial officer Kevin Jacobs said on the company’s first quarter earnings conference call on Tuesday.

“Collectively, these transactions lowered our cost of debt by 25 basis points, reduced our interest rate risk with roughly 75% of our debt now at fixed rates and extended our average debt maturity by approximately a year and a half.

“We now have no meaningful maturities for six years,” Jacobs said.

The McLean, Va.-based hospitality company’s adjusted EBITDA for the first quarter was $424 million, a 16% increase from the first quarter of 2016.

Total cash and cash equivalents was $986 million as of March 31, including $124 million of restricted cash and cash equivalents. The company did not have any borrowings under its $1 billion revolving credit facility as of March 31.

On March 7, Hilton Worldwide Finance LLC said its indirect subsidiaries Hilton Worldwide Finance LLC and Hilton Worldwide Finance Corp. planned to redeem their outstanding 5 5/8% senior notes due 2021 using proceeds of a new issue.

On the same date, Hilton Worldwide priced $1.5 billion of senior notes (Ba3/BB+) in two tranches.

The short maturity tranche featured $900 million of eight-year notes that priced at par to yield 4 5/8%. The yield printed at the tight end of yield talk in the 4¾% area.

The long tranche featured $600 million of 10-year notes that priced at par to yield 4 7/8%. The yield printed at the tight end of yield talk in the 5% area.

Goldman Sachs & Co. was the left bookrunner. BofA Merrill Lynch, Deutsche Bank Securities Inc., J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC, Barclays and Wells Fargo Securities LLC were the joint bookrunners.

Then, on March 9, the company finalized pricing on its $3,959,000,000 covenant-light term loan B-2 due October 2023 at Libor plus 200 basis points, the low end of the Libor plus 200 bps to 225 bps talk.

As before, the term loan B-2 has a 0% Libor floor.

Deutsche Bank Securities Inc. and Goldman Sachs Bank USA were the bookrunners on the loan.

Proceeds will be used to reprice an existing $3,209,000,000 term loan B-2 from Libor plus 250 bps with a 0% Libor floor and to extend/refinance a $750 million term loan B-1.

© 2015 Prospect News.
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