Hyatt Hotels Corp. is strategically turning to the bond market to secure the financing for its ambitious $2.6 billion acquisition of Playa Hotels & Resorts, a prominent owner of all-inclusive resorts dotting the idyllic Caribbean landscape.
The move signals a significant bet on the growing appeal of all-inclusive travel and a calculated expansion of Hyatt’s already extensive portfolio.
On Monday, Hyatt intends to launch a bond sale featuring both three-year and seven-year fixed-rate notes.
This dual-tranche approach allows the hospitality giant, which manages, franchises, owns, and develops branded hotels, resorts, and residential and vacation ownership properties worldwide, to attract a wider range of investors with varying risk appetites and investment horizons.
A busy day in the bond market
Hyatt’s bond issuance comes at a time when the investment-grade primary bond market anticipates a surge in activity.
Around six issuers are expected to tap the debt market on Monday, creating a competitive environment where issuers must offer attractive terms to entice investors.
The three-year notes are being marketed with a yield of 1.3 percentage points above benchmark Treasuries, while the seven-year bonds are being offered at a yield of approximately 1.75 percentage points above the benchmark.
Both tranches boast solid investment-grade ratings, with expected ratings of Baa3 from Moody’s Ratings and BBB- from both S&P Global Ratings and Fitch Ratings, adding to their appeal for risk-averse investors.
Hyatt’s offering incorporates a special mandatory redemption clause, providing investors with a degree of protection.
This clause stipulates that if the Playa Hotels acquisition fails to close by October 9, 2025, or if the purchase agreement is terminated, Hyatt will be obligated to redeem the notes at 101 percent of their principal amount, plus any accrued interest.
This feature acts as a safeguard, mitigating the risk for investors should the acquisition not proceed as planned.
However, it’s important to note that the bond sale itself is not contingent on the successful completion of the acquisition, signaling Hyatt’s confidence in the deal.
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