American multinational hospitality company Hyatt Hotels Corporation (H) recently announced the pricing of its senior notes due in 2023 and 2024 for an aggregate principal amount of $1.75 billion.
The offering is likely to close on October 1, 2021. The company also has the option to redeem all or any portion of the notes at 100% of their principal amount any time or after October 1, 2022.
The offering consists of two senior notes due in 2023 and one in 2024. The notes due in 2023 have aggregate principal amounts of $700 million and $300 million. While the $700 million offering has an interest rate of 1.3%, the $300 million offering bears interest at a rate equal to compounded SOFR (Secured Overnight Financing Rate), reset quarterly, plus 105 basis points. Additionally, the notes due in 2024 have an aggregate principal amount of $750 million and a fixed annual rate of 1.8%.
The company intends to use the net proceeds from the offering to partly fund the purchase price for its pending acquisition of Apple Leisure Group. Also, the net proceeds from the offering are to be used for general corporate purposes and refinancing the company’s $750 million principal amount of floating rate notes due 2022. (See Hyatt stock chart on TipRanks)
On September 27, Bank of America Securities analyst Shaun Kelley downgraded the stock to Sell from Hold with a price target of $85, which implies upside potential of 5.8% from current levels.
According to the analyst, though Hyatt’s transition to a more capital-light model, its recent targeted asset sales and its acquisition of Apple Leisure may put the company in a better position later in the lodging cycle, the delta variant of COVID-19 has dented the prospects of travel, which remains a headwind for the company.
Consensus among analysts is a Hold based on 7 Holds and 1 Sell. The average Hyatt price target of $82.36 implies upside potential of 2.6% from current levels. Shares have gained 47.4% over the past year.
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