NH Reinforces Its Capital Structure And Optimises Its Corporate Debt
- NH's majority shareholder, Minor International, has agreed an equity investment of €100m, providing an immediate liquidity reinforcement. Specifically, the investment will take the form of a convertible loan to be capitalised through a rights offering process addressed to all shareholders
- Liquidity, which stood at €261m at 31 March 2021, will be reinforced by that equity investment and also by the commitment to raise more than €200 million from asset rotation transactions during the next six months
- The maturity of the ICO loan has been extended from 2023 until 2026
- Compliance with the Company's financial covenants has been waived for all of 2021 and a substantial relaxation of the metrics to be used in the next covenant test in June 2022 has been agreed
- In order to continue to enhance its maturity profile, the Company is proactively analysing alternatives to extend 2023 maturities
- The Contingency Plan to be executed between 2021 and 2022 will unlock €60m of structural cost savings, allowing the Company to recover pre-COVID EBITDA levels one year sooner than the sector consensus, which expects to recover pre-crisis activity levels by the end of 2023 or early 2024
- The recovery in domestic leisure demand is already tangible and is gaining momentum as Europe steps up its vaccination rate and eases restrictions. The difficulties faced in early 2021 are behind and the Company believes that a gradual recovery is imminent
- NH stands to benefit from its strong recognition as a hotel operator and its strong market positioning to lift exposure to management contracts in its business mix ahead of potential movements in the sector
The rights offering is not the only liquidity reinforcement on the horizon. NH Hotel Group has also committed to make solid progress during the next six months on the asset rotation plan already underway, always under sale & leaseback or sale & management back formulas. The Company expects to raise more than €200 million, after tax, from this initiative. The equity investment will lift NH's liquidity in the short term, while the proceeds from the asset rotation effort will be used to further top up liquidity and to reduce corporate debt in the medium term.
Elsewhere, the Group has extended the maturity date on the €250 million syndicated loan secured by Spain's official credit institute, ICO, in April 2020 from 2023 to 2026, with no amortizing schedule until maturity. The waiver on all financial covenants has been extended for all of 2021 and the thresholds for the next covenant test, scheduled for June 2022, have been eased considerably.
In addition, the Board of Directors has agreed to proactively analyse the financial markets situation with the goal of refinancing its corporate debt due in 2023 in order to provide the Company with a more flexible financial structure and one that it is better timed with the sector's turnaround.
According to Ramón Aragonés, CEO NH Hotel Group, this battery of financial measures will allow the Group to tackle the sector recovery from a position of greater strength. “The acceleration in the pace of vaccination and increase in mobility in Europe are already driving a recovery in leisure and tourist demand within the region. During the last 15 months we have managed to structure a highly efficient operating model with considerably lower structural costs, measures that will deliver growing profitability during the recovery and also in the longer term. The reinforcement of our capital structure thanks to the equity investment and the enhancement of our debt maturity profile lay the foundations for our financial sustainability, which will be further bolstered when we complete the asset rotation transactions currently underway”.
Ramón Aragonés also highlighted the proactive stance and management capabilities displayed by the Company during the pandemic. “We set an ambitious contingency plan in motion very early on, a plan that has enabled us to preserve our cash and guarantee the Group's sustainability even in the direst scenario in its history. We were forced to take difficult decisions, including negotiating the first redundancy package in the sector with our unions. In parallel we continue to keep an iron grip on operating costs, which decreased by 56.6% year-on-year in the first quarter of 2021. Step by step we are laying the groundwork for gaining prominence as the recovery kicks in. We expect to return to our pre-COVID EBITDA levels one year sooner than expected in the sector, which estimates that 2019 activity volumes will not be revisited until the end of 2023 or beginning of 2024. As a consolidated hotel operator, we also aspire to position ourselves as a preferred strategic partner for those investors keen to increase their exposure to the hotel property sector, a move that would help us rebalance our business model with a greater weight of management agreements”.
About NH Hotel Group
NH Hotel Group is a consolidated multinational player and a benchmark urban hotel operator in Europe and the Americas, where it runs more than 350 hotels. Since 2019, the Company is working with Minor Hotels on integrating all of its hotel brands under a single corporate umbrella with a presence in over 50 countries worldwide. A portfolio of over 500 hotels has been articulated around eight brands - NH Hotels, NH Collection, nhow, Tivoli, Anantara, Avani, Elewana and Oaks - to forge a broad and diverse range of hotel propositions in touch with the needs and desires of today's world travellers.