HYATT HOTELS CORPORATION Item 1.01. Entry into a Material Definitive Agreement.
On
The Revolver Amendment, among other things, relieves the Company's compliance
with certain covenants under the Revolving Credit Agreement by (i) suspending
the testing of the leverage ratio covenant until
The Revolver Amendment also provides that the obligations thereunder shall be
secured by a first priority security interest (pari passu with the Bridge
Facility) in 100% of the capital stock of certain of the Company's subsidiaries
(the "Pledged Entities") and substantially all the assets of the Pledged
Entities, subject to customary exceptions, until the date on which the Company
provides notice of the repayment in full of the Bridge Facility or the Bridge
Facility otherwise terminates and imposes mandatory prepayment requirements
consistent with the Bridge Facility. The collateral and mandatory prepayment
requirements under the Revolver Amendment terminate when the Bridge Facility
terminates, as described above. The
The foregoing description of the Revolver Amendment is qualified in its entirety
by reference to the text of the Revolver Amendment, a copy of which is attached
hereto as Exhibit 10.1, and incorporated herein by reference. The Revolver
Amendment has been included as an exhibit to this filing to provide investors
and security holders with information regarding its terms and is not intended to
provide any other factual information about Hyatt or any of its subsidiaries.
The representations and warranties in the Revolver Amendment were made only for
the purposes of the Revolver Amendment, as of a specified date, and may be
subject to a contractual standard of materiality different from what might be
viewed as material to stockholders, or may have been used for the purpose of
allocating risk between the parties. Accordingly, the representations and
warranties in the Revolver Amendment are not necessarily characterizations of
the actual state of facts concerning Hyatt or any of its subsidiaries at the
time they were made or otherwise and should only be read in conjunction with the
other information that Hyatt makes publicly available in reports, statements and
other documents filed with the
Item 2.02. Results of Operations and Financial Condition.
On
The information furnished under Item 2.02 in this Form 8-K shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that section and shall not be deemed incorporated by reference in any filing made by the Company under the Securities Act of 1933, as amended (the "Securities Act"), or the Exchange Act, except as set forth by specific reference in such filing.
Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
The information included in Item 1.01 of this Form 8-K is incorporated by reference into this Item 2.03.
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Item 7.01. Regulation FD Disclosure.
Bridge Credit Agreement
On
Share Repurchase Program and Quarterly Cash Dividend
On
Recent Developments
On
The information furnished under Item 7.01 in this Form 8-K shall not be deemed "filed" for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section and shall not be deemed incorporated by reference in any filing made by the Company under the Securities Act or the Exchange Act, except as set forth by specific reference in such filing.
Item 8.01. Other Events.
The Company is supplementing the risk factors described in the Company's Annual
Report on Form 10-K for the fiscal year ended
The global COVID-19 pandemic has had, and is expected to continue to have, a material adverse impact on the travel industry generally and, as a result, on our business and results of operations, and these impacts may persist for an extended period of time or become more pronounced.
The global spread and unprecedented impact of COVID-19 is complex and rapidly
evolving and has resulted in significant disruption and additional risks to our
business, the lodging and hospitality industries and the global economy. On
The extent, duration and magnitude of the COVID-19 pandemic's effects will depend on future developments, all of which are highly uncertain and difficult to predict, including the impact of the pandemic on global and regional economies, travel, and economic activity, as well as actions taken by governments, business and individuals in response to the pandemic or any future resurgence. These developments include the impact of the COVID-19 pandemic on unemployment rates and consumer discretionary spending; the demand for travel and transient and group business; levels of consumer confidence; the ability of our third-party owners, franchisees or hospitality venture partners to successfully navigate the impacts; and the post-pandemic pace of recovery.
The COVID-19 pandemic has subjected our business, operations and financial condition to a number of significant risks:
• Revenues and Expenses: With the global spread of COVID-19 beginning in
March 2020 , we began to experience significant decreases in demand and
system-wide RevPAR. The effects of the pandemic have materially adversely
affected, and we expect will continue to materially adversely affect, the
revenues and profitability of our owned and leased properties and the
amount of management and franchise fee revenues we are able to generate
from our managed and franchised properties.
In addition, the economic impact of the pandemic has made it difficult for certain third-party owners or franchisees to meet working capital needs, and could make it difficult for them to service debt obligations or obtain financing on favorable terms, or at all, which could have a significant impact on the overall level, cost, and pace of our future development and, therefore, our ability to increase revenue. The impact of the pandemic could cause third-party owners or franchisees to declare bankruptcy or cause their lenders to declare a default, accelerate the related debt or foreclose on the property. Such bankruptcies, sales or foreclosures could, in some cases, result in the termination of our management or franchise agreements and impact our anticipated income and cash flows. Additionally, third-party owners or franchisees may be unable or unwilling to pay us amounts that we are entitled to receive on a timely basis or at all, which would adversely affect our revenues and liquidity.
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The COVID-19 pandemic could also cause us to incur additional expenses. For example, as a result of the pandemic and resulting deterioration in hotel operating performance, we may be required to fund shortfalls in operating profit under performance tests or guarantees we have entered into in favor of some third-party owners. Moreover, our third-party owners and franchisees could fail to reimburse us for any payments we may be required to make to third-party lenders to whom we made financial guarantees for the timely repayment of all or a portion of the third-party owners' or franchisees' debt related to hotels that we manage or franchise. We may find it necessary or in the interest of our business to provide financial or other types of support to certain of these parties, which could materially increase our expenses and cash flows. While governments have and may continue to implement various stimulus and relief programs, it is uncertain whether and to what extent we or our third-party owners or franchisees will be eligible to participate in such programs, whether conditions or restrictions imposed under such programs will be acceptable, and whether such programs will be effective in avoiding or significantly mitigating the financial impacts of the COVID-19 pandemic. Further, we may incur additional costs related to severance payments in the event our workforce is reduced. Even after the COVID-19 pandemic subsides, we could experience a longer-term impact on our costs, including the need for enhanced health and hygiene or social distancing requirements in one or more regions in attempts to counteract future outbreaks or a resurgence of the pandemic.
• Operations: In response to the significant decline in demand for hotels
across our system, we have taken actions and continue to evaluate spending
to manage operating expenses and enhance our financial resources. These
actions include furloughing a substantial number of our colleagues,
implementing reduced work weeks and pay for other colleagues across our
global regions, eliminating non-essential spending and corporate
initiatives and reducing costs related to certain system-wide expenses we
incur on behalf of third-party owners related to marketing, sales,
reservations and technology. We have received and we may also receive
additional demands or requests from labor unions that represent our
colleagues, whether in the course of our periodic renegotiation of our
collective bargaining agreements or otherwise, for additional
compensation, healthcare benefits or other terms that could increase
costs, and we could experience labor disputes or disruptions as we
continue to implement our mitigation plans. Some actions we have taken, or
that we may take in the future, to reduce costs for us or our third-party
owners or franchisees may negatively impact guest loyalty, owner
preference or our ability to attract and retain colleagues, and our
reputation and market share may suffer as a result. Further, once the
effects of the pandemic subside, we expect the recovery period could be
extended and we expect that certain operational changes, particularly with
respect to enhanced health and safety measures, will be necessary and
could increase our ongoing costs.
• Financial Condition and Indebtedness: On
$400 million under our revolving credit facility to enhance our cash position in response to the COVID-19 pandemic. We repaid$50 million of these borrowings onMarch 31, 2020 . As ofApril 21, 2020 , we had$350 million of borrowings outstanding under our revolving credit facility. OnApril 21, 2020 , we amended our revolving credit facility to obtain relief from certain covenants and add or tighten other covenants throughApril 1, 2021 . As we manage through the effects of the pandemic, our level of indebtedness may increase substantially. In addition, certain debt covenants may restrict our ability to make dividend payments to shareholders or engage in share repurchase activity. A default under our revolving credit facility would enable the lenders to terminate their commitments thereunder and could trigger a cross-default, acceleration or other consequences under our other indebtedness or financial instruments. There is no guarantee that debt financings will be available in the future to fund our obligations or will be available on terms consistent with our expectations. We also expect the impact of the COVID-19 pandemic on the financial markets to adversely affect our ability to raise equity financing. Changes in the credit ratings of our debt, including our revolving credit facility and the notes, could have an adverse impact on our interest expense. As a result of the general economic uncertainty and the impact of the COVID-19 pandemic, some credit agencies have downgraded our credit ratings. If our credit ratings were to be further downgraded, or general market conditions were to ascribe higher risk to our credit rating levels, our industry, or our company, our access to capital and the cost of debt financing would be negatively impacted.
• Growth: Our plans for growth could be negatively impacted by the COVID-19
pandemic. The current environment could result in difficulties for hotel
owners and franchisees to obtain commercially viable financing. The
commitments of owners and developers with whom we have agreements are
subject to numerous conditions, and the eventual development and
construction of our pipeline not currently under construction is subject
to numerous risks, including, in certain cases, obtaining adequate
financing. In addition, we are experiencing construction delays as a
result of business activity restrictions and supply chain interruptions.
As a result, our current development pipeline may not be completed and
developed into new hotels and those hotels may not open when anticipated,
which will impact our net rooms growth. Further, our development pipeline
may not grow at the same rate as in the past, and properties in our
existing system-wide inventory may exit as a result of the COVID-19
pandemic, which would also negatively impact our net rooms growth. In
. . .
Item 9.01 Financial Statements and Exhibits.
Exhibit
Number Exhibit Description
10.1 Second Amendment to the Second Amended and Restated Credit
Agreement, dated as of April 21, 2020 , among Hyatt Hotels
Corporation and Hotel Investors I, Inc. , as Borrowers, certain
subsidiaries of Hyatt Hotels Corporation , as Guarantors, the lenders
party thereto and Wells Fargo Bank, National Association , as
Administrative Agent
99.1 Disclosure provided to investors
104 Cover Page Interactive Data File (embedded within the Inline XBRL
document)
Forward-Looking Statements
Forward-Looking Statements in this Current Report on Form 8-K, which are not
historical facts, are forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. These statements include, but
are not limited to, statements related to our plans, strategies, financial
performance, prospects or future events, and involve known and unknown risks
that are difficult to predict. As a result, our actual results, performance or
achievements may differ materially from those expressed or implied by these
forward-looking statements. In some cases, you can identify forward-looking
statements by the use of words such as "may," "could," "expect," "intend,"
"plan," "seek," "anticipate," "believe," "estimate," "predict," "potential,"
"continue," "likely," "will," "would" and variations of these terms and similar
expressions, or the negative of these terms or similar expressions. Such
forward-looking statements are necessarily based upon estimates and assumptions
that, while considered reasonable by us and our management, are inherently
uncertain. Factors that may cause actual results to differ materially from
current expectations include, among others, the factors discussed in our Annual
Report on Form 10-K for the fiscal year ended
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limiting or banning travel; the impact of the COVID-19 pandemic and actions taken in response to the COVID-19 pandemic or any future resurgence, on global and regional economies, travel, and economic activity, including the duration and magnitude of its impact on unemployment rates and consumer discretionary spending; the ability of third-party owners, franchisees or hospitality venture partners to successfully navigate the impacts of the COVID-19 pandemic; the pace of recovery following the COVID-19 pandemic or any future resurgence; general economic uncertainty in key global markets and a worsening of global economic conditions or low levels of economic growth; the rate and the pace of economic recovery following economic downturns; levels of spending in business and leisure segments as well as consumer confidence; declines in occupancy and average daily rate; limited visibility with respect to future bookings; loss of key personnel; domestic and international political and geopolitical conditions, including political or civil unrest or changes in trade policy; hostilities, or fear of hostilities, including future terrorist attacks, that affect travel; travel-related accidents; natural or man-made disasters such as earthquakes, tsunamis, tornadoes, hurricanes, floods, wildfires, oil spills, nuclear incidents, and global outbreaks of pandemics or contagious diseases or fear of such outbreaks, such as the COVID-19 pandemic; our ability to successfully achieve certain levels of operating profits at hotels that have performance tests or guarantees in favor of our third-party owners; the impact of hotel renovations and redevelopments; risks associated with our capital allocation plans; the seasonal and cyclical nature of the real estate and hospitality businesses; changes in distribution arrangements, such as through internet travel intermediaries; changes in the tastes and preferences of our customers; relationships with colleagues and labor unions and changes in labor laws; the financial condition of, and our relationships with, third-party property owners, franchisees and hospitality venture partners; the possible inability of third-party owners, franchisees or development partners to access capital necessary to fund current operations or implement our plans for growth; risks associated with potential acquisitions and dispositions and the introduction of new brand concepts; the timing of acquisitions and dispositions and our ability to successfully integrate completed acquisitions with existing operations; failure to successfully complete proposed transactions (including the failure to satisfy closing conditions or obtain required approvals); our ability to successfully execute on our strategy to expand our management and franchising business while at the same time reducing our real estate asset base within targeted timeframes and at expected values; declines in the value of our real estate assets; unforeseen terminations of our management or franchise agreements; changes in federal, state, local, or foreign tax law; increases in interest rates and operating costs; foreign exchange rate fluctuations or currency restructurings; lack of acceptance of new brands or innovation; general volatility of the capital markets and our ability to access such markets; changes in the competitive environment in our industry, including as a result of the COVID-19 pandemic, industry consolidation, and the markets where we operate; our ability to successfully grow the World of Hyatt loyalty program; cyber incidents and information technology failures; outcomes of legal or administrative proceedings; and violations of regulations or laws related to our franchising business. These factors are not necessarily all of the important factors that could cause our actual results, performance, or achievements to differ materially from those expressed in or implied by any of our forward-looking statements. Other unknown or unpredictable factors also could harm our business, financial condition, results of operations, or cash flows. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements set forth above. Forward-looking statements speak only as of the date they are made, and we do not undertake or assume any obligation to update publicly any of these forward-looking statements to reflect actual results, new information or future events, changes in assumptions, or changes in other factors affecting forward-looking statements, except to the extent required by applicable law. If we update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.
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