Hyatt issues $1 billion in senior notes for Playa acquisition

Hyatt Hotels Corp (NYSE:H), the global hospitality company with a market capitalization of $12.07 billion, has announced the issuance and sale of $1 billion in senior notes, split evenly between 5.050% notes due in 2028 and 5.750% notes due in 2032, as revealed in a recent SEC filing. According to InvestingPro data, the company currently operates with a moderate level of debt, maintaining a debt-to-equity ratio of 1.14. The transaction took place on Wednesday, with the company securing approximately $993.1 million after deducting underwriting discounts and estimated offering expenses.

The proceeds from the notes offering are earmarked to partially fund Hyatt’s impending acquisition of Playa Hotels & Resorts N.V., including any related fees and expenses. The notes were issued under an existing registration statement and are governed by an indenture between Hyatt and Computershare Trust Company, N.A., as trustee.

Interest on these notes will be paid semi-annually, with the first payment due on September 30, 2025. The notes carry a provision for early redemption, allowing Hyatt to repurchase them at a premium before their respective maturity dates. Additionally, in the event of a change of control, note holders may require Hyatt to repurchase their notes at 101% of the principal value plus any accrued interest.

In the event that the Playa Hotels Acquisition does not materialize, a special mandatory redemption clause obligates Hyatt to redeem the notes at a slightly higher price than the principal amount plus accrued interest.

The indenture also includes covenants that restrict Hyatt’s and certain subsidiaries’ ability to create liens on principal property, engage in sale and leaseback transactions, and undergo mergers or asset consolidations.

The notes rank equally with Hyatt’s other unsecured unsubordinated debt, senior to future subordinated debt, and are effectively subordinated to secured obligations to the extent of the collateral’s value. They are not guaranteed by Hyatt’s subsidiaries, making them structurally subordinate to the subsidiaries’ liabilities.

The offering was facilitated by an underwriting agreement with BofA Securities, Inc., J.P. Morgan Securities LLC, and Wells Fargo (NYSE:WFC) Securities, LLC, acting as representatives of the underwriters.

This financial move comes as Hyatt prepares to expand its portfolio through the Playa Hotels Acquisition, aligning with its strategy to grow its management and hotel services while reducing real estate assets. The information in this article is based on a press release statement from Hyatt Hotels Corp.

In other recent news, Hyatt Hotels Corporation has announced its acquisition of Playa Hotels & Resorts N.V. for approximately $2.6 billion, which includes around $900 million in net debt. This strategic move is expected to enhance Hyatt’s resort offerings and expand its brand footprint. Additionally, the company disclosed that it repurchased over a million shares of its Class A common stock, spending about $149 million during this period. Meanwhile, Bernstein SocGen Group maintained its Outperform rating on Hyatt, with a price target of $173, highlighting the company’s introduction of a new brand, Hyatt Select, aimed at the Upper Midscale market in the Americas. This new brand is part of Hyatt’s strategy to cater to business and leisure travelers in secondary markets.

Furthermore, Hyatt announced the appointment of Tracey T. Travis to its Board of Directors, expanding the board from twelve to thirteen members. This governance update aligns with the company’s practices to enhance the board’s expertise. The hospitality sector, including Hyatt, faced challenges as travel stocks, such as airlines and hotels, experienced a downturn due to revised profit forecasts from major airlines like Delta Air Lines (NYSE:DAL). These developments reflect broader economic concerns impacting the travel industry.

Overall, these recent developments indicate Hyatt’s strategic moves to strengthen its market position through acquisitions, brand expansion, and governance enhancements while navigating industry-wide challenges.

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