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Hotelbeds Borrows To Finance Its Own Purchase (By Cinven & CPPIB)

8 June 2016 – Expansión

Hotelbeds has had new owners for just over a month. At the end of April, the private equity firm Cinven and the Canadian fund CPPIB won the bid opened by TUI to sell the Spanish travel services supplier. They put a joint offer on the table, valuing the company at €1,165 million, which exceeded all of the other bids. Now, they are holding negotiations regarding how they will pay that price.

All indications suggest that the target company will end up paying a large portion of the bill itself, in a debt operation that is typical in private equity acquisitions. According to several financial sources, Hotelbeds is in conversations with seven banks to obtain financing, including a syndicated loan amounting to €490 million and a line of credit amounting to another €150 million.

BBVA, Morgan Stanley, HSBC, UniCredit, Deutsche Bank, Bank of Ireland and Mizuho are the entities participating in the syndicate, which is expected to be closed within the next few days and whose fruits will be used to pay for some of the acquisition.

Neither the purchaser nor the vendor has provided details about how much of the €1,165 million value assigned to Hotelbeds will be paid for in debt and how much will be paid for in cash, but some of the parties involved implied that the latter will account for more than half of the total price. Using that reference and the fact that Cinven and CPPIB are not purchasing 100% of the company, rather some of its shares will remain in the hands of the travel services supplier’s management team, then it seems likely that the €490 million syndicated loan will cover a significant part of the total financing.

Hotelbeds will pay at least 500 basis points (5.5%) above Euribor for the syndicated loan, which will have a seven year term, according to financial sources. That spread was the maximum established to begin negotiations, so it may decrease, depending on the banks’ appetite and the conditions offered by the company.

The same thing will happen with the €150 million line of credit. In that case, the term will be six years and the minimum spread will amount to 450 basis points, but the definitive conditions will not be agreed until the negotiations have been finalised. (…).

Hotelbeds’ financial results work in its favour with respect to its negotiations with the banks, according to financial sources. The supplier works with 75,000 hotels in 180 countries and recorded a turnover of €1,200 million in 2015 and an EBITDA of €117 million. In addition to hotel rooms, the company also manages transfers, trips and corporate events.

Original story: Expansión (by Inés Abril)

Translation: Carmel Drake