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Hilton Draws Down $1.75 Billion Credit Line to Ease Virus Hit
March 12, 2020
Source: Yahoo Finance
Hilton Worldwide Holdings Inc. is tapping its revolving credit line as it grapples with the impact of coronavirus on global travel.
The hotel company has drawn down a $1.75 billion loan to “to preserve financial flexibility in light of current uncertainty in the global markets resulting from the COVID-19 outbreak,” according to a filing late Wednesday that confirmed an earlier report from Bloomberg News. The current interest rate on the credit facility is 2.18%.
The coronavirus outbreak has roiled markets around the world, and crimped demand for travel as business trips are curtailed and large corporate events are canceled. The crisis has hammered stocks of lodging companies, which have seen room revenue and occupancy rates plummet.
Hilton had said that the virus would be a minor drag on earnings, mainly affecting its business in Asia. But that tone has changed as the outbreak hits more and more people. Earlier this week, the company pulled its 2020 guidance, acknowledging “the potential negative impact will be greater than our previous estimate,” Chief Executive Officer Christopher Nassetta said in a statement.
The McLean, Virginia-based company increased the borrowing capacity of its revolving credit facility to $1.75 billion last June. It had drawn down $255 million of that total by the end of 2019, according to filings. Hilton’s revolving credit lenders include affiliates of Deutsche Bank AG and Goldman Sachs Group Inc.
The company’s shares plunged 10% on Wednesday to $81.09, the biggest plunge since December 2013. The stock has tumbled nearly 30% in the past month, outpacing the decline in the S&P 500 Index.
Hilton is not alone in taking quick steps to shore up its balance sheet as broader market volatility raises concerns about a potential liquidity crunch. Boeing Co. is planning to draw down the full amount of a $13.8 billion loan as early as Friday, Bloomberg News reported earlier.
Blackstone Group Inc., meanwhile, is asking portfolio companies to draw down their credit lines to help prevent any liquidity shortfalls amid signs of mounting stress in markets, according to people with knowledge of the matter.
The discussions have focused on sectors affected by the spread of the coronavirus, such as the hospitality industry, as well as energy firms facing a slump in oil prices.
Jonathan Gray, Blackstone’s president, is the chairman of Hilton’s board. Blackstone once owned the hotel company, but sold the last of its shares in 2018.
--With assistance from Patrick Clark.
To contact the reporter on this story: Gillian Tan in New York at gtan129@bloomberg.net
To contact the editors responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net, Craig Giammona, Christine Maurus
For more articles like this, please visit us at bloomberg.com
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