Choice Hotels (NYSE:CHH) International Inc. (NYSE:CHH) has entered into a second amended and restated senior unsecured credit agreement, expanding its borrowing capacity to $1 billion, the company disclosed in a filing with the Securities and Exchange Commission on Friday.
The hotel franchisor, based in North Bethesda, Maryland, said the new agreement, dated Thursday, amends and restates its previous credit arrangement from August 20, 2018. The revamped facility increases the commitments under the unsecured revolving credit line from $850 million and extends the final maturity date from August 20, 2026, to June 28, 2029.
Under the new agreement, the company has the option, subject to lender consent and customary conditions, to request up to three one-year extensions of the maturity date. Additionally, the agreement allows for up to $50 million in alternative currency loans, up to $10 million for the issuance of letters of credit, and up to $25 million for swingline loans.
Choice Hotels may also increase the revolving credit facility or add new term loan facilities by up to $500 million, contingent upon lender commitments and meeting certain conditions.
The interest rates for the credit line will be based on either SOFR (Secured Overnight Financing Rate) with a credit spread adjustment and a margin ranging from 0.90% to 1.50%, or a base rate plus a margin ranging from 0.00% to 0.50%, depending on the company's senior unsecured long-term debt rating or its total leverage ratio.
The agreement includes a commitment fee on the total commitments under the revolving credit facility, which will be calculated on the daily amount of the commitments times an annual percentage ranging from 0.075% to 0.25%.
The company is required to maintain a consolidated fixed charge coverage ratio of at least 2.5 to 1.0 and a total leverage ratio of not more than 4.5 to 1.0, with certain allowances for increases following material acquisitions.
The proceeds from the credit line are expected to be used for general corporate purposes, including working capital, debt repayment, stock repurchases, dividends, and investments.
The filing also noted that some of the lenders and their affiliates have provided, and may continue to provide, various financial services to Choice Hotels and its subsidiaries for customary fees.
This financial maneuvering by Choice Hotels comes as the hospitality industry continues to navigate the post-pandemic landscape, with companies like Choice Hotels strategically positioning themselves for recovery and growth.
In other recent news, Choice Hotels International has witnessed a significant start to 2024 with a 17% rise in adjusted EBITDA and a 14% increase in adjusted EPS in the first quarter, compared to the same period the previous year. This robust growth is attributed to the revenue synergies from the integration of Radisson Americas and a strong global pipeline.
The company's recent developments include a record global pipeline of over 115,000 rooms, a 10% increase quarter-over-quarter, and the signing of franchise agreements in France, doubling the company's footprint in the market.
On the other hand, Truist Securities adjusted its financial outlook for Choice Hotels, reducing the stock price target to $144 from the previous $146, while retaining a Hold rating on the stock. The firm's 2024 estimated EBITDA has been slightly increased to $593 million from $590 million, while the adjusted earnings per share (EPS) forecast has been decreased to $6.40 from $6.48.
Looking ahead to 2025, the estimated EBITDA has been revised downward to $605 million from $609 million, with the adjusted EPS projection also seeing a reduction to $6.69 from $6.79.
These recent developments provide investors with an updated insight into the expected financial performance of Choice Hotels in the coming years.
InvestingPro Insights
Choice Hotels International Inc . (NYSE:CHH) has demonstrated robust financial performance, with real-time data from InvestingPro showing a strong gross profit margin of 90.37% over the last twelve months as of Q1 2024. This impressive margin underscores the company's ability to maintain profitability in a challenging industry landscape.
Furthermore, the company has a track record of consistent shareholder returns, having maintained dividend payments for 21 consecutive years, with a current dividend yield of 0.97%.
InvestingPro Tips indicate that analysts have revised their earnings expectations downwards for the upcoming period, suggesting that investors may want to monitor the company's performance closely. Moreover, the company's short-term obligations exceeding its liquid assets could be a point of consideration for those assessing the company's financial health.
With the company trading at a high revenue valuation multiple and a Price/Book multiple of 845.27, investors should weigh these metrics against the company's strategic financial moves and market position.
For those looking for a deeper analysis, there are over 7 additional InvestingPro Tips available for Choice Hotels, which can help investors make more informed decisions. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and gain access to valuable insights that could shape your investment strategy.
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