Marriott Vacations secures new $1.25 billion credit facilities

Marriott Vacations Worldwide Corporation (NYSE:VAC) has entered into a significant financial arrangement, securing new credit facilities totaling $1.25 billion. The deal, finalized on Monday, replaces and expands the company’s existing credit lines. According to InvestingPro data, the company maintains strong liquidity with a current ratio of 3.34, indicating its liquid assets comfortably exceed short-term obligations. The new facilities come at a time when the stock is trading near its 52-week low of $63.46.

The new agreement, orchestrated with JPMorgan Chase (NYSE:JPM) Bank, N.A. and other lenders, includes an $800 million senior secured revolving credit facility, set to mature on March 24, 2030. This facility supersedes the previous $750 million revolving credit line that was due to mature in 2027. With a market capitalization of $2.3 billion and total debt of $5.3 billion, this refinancing represents a crucial move for the company’s capital structure. InvestingPro analysis suggests the stock is currently undervalued, presenting a potential opportunity for investors.

Additionally, Marriott Vacations has arranged for a $450 million delayed-draw term loan A facility, exclusively earmarked to fund the redemption or repurchase of its 0.00% Convertible Senior Notes due January 15, 2026. This portion of the credit is scheduled for maturity on December 31, 2027.

Under certain conditions, amounts from the delayed-draw term loan will be subject to mandatory prepayment with the net proceeds from future debt issuances or term loan borrowings. The interest rates for borrowings under the new facilities are tied to the secured overnight financing rate (SOFR) plus a margin ranging from 1.50% to 2.00%, which varies according to Marriott Vacations’ first lien leverage ratio.

The agreement also includes modifications to the existing credit agreement, such as an increased maximum first lien leverage ratio from 3.00:1.00 to 3.50:1.00, which can temporarily rise by 0.50:1.00 following certain acquisitions. Furthermore, a new covenant has been added requiring the maintenance of a minimum interest coverage ratio of 2.00:1.00. The amendments provide Marriott Vacations and its subsidiaries with enhanced financial flexibility.

This strategic financial move is part of Marriott Vacations’ broader efforts to manage its capital structure and secure long-term financial stability. The full details of the amendment are outlined in Exhibit 10.1 of the company’s Current Report on Form 8-K, filed with the SEC. For a comprehensive understanding of VAC’s financial health and future prospects, investors can access detailed analysis and over 30 key financial metrics through InvestingPro’s exclusive research reports, available for more than 1,400 US stocks.

The information for this article is based on a press release statement.

In other recent news, Marriott Vacations Worldwide reported its fourth-quarter 2024 earnings, surpassing analysts’ expectations with an earnings per share of $1.86, compared to the forecasted $1.61. The company also exceeded revenue projections, reporting $1.33 billion against the anticipated $1.24 billion. Marriott Vacations highlighted a 7% increase in contract sales, driven by a 9% rise in first-time buyer sales, despite a slight 1% decrease in adjusted EBITDA to $185 million. The company announced new developments, including a resort in Waikiki and plans for a Marriott Vacation Club in Thailand.

Analysts at Citizens JMP maintained a Market Outperform rating with a $115 price target, emphasizing the company’s adjusted EBITDA performance, which surpassed expectations. Barclays (LON:BARC) reiterated its Overweight rating, maintaining a $97 price target, citing positive trends and potential upside to 2026 expectations. However, Barclays also noted Marriott Vacations’ credibility as a near-term challenge. Mizuho (NYSE:MFG) Securities adjusted its price target to $112 from $120 while maintaining an Outperform rating, acknowledging unexpected year-over-year challenges affecting the company’s financial outlook.

Marriott Vacations projects a 4% growth in contract sales for 2024 and anticipates an increase in EBITDA enhancement initiatives. The company remains optimistic about its modernization efforts and their contribution to future growth, despite facing headwinds in rentals, compensation, and project spending. As Marriott Vacations navigates these challenges, its stock performance and strategic initiatives will be closely monitored by investors.

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