Hyatt Hotels Corporation (H) recently announced that it has renewed and extended its unsecured revolving credit facility. The company has renewed its credit facility with a consortium of key relationship banks.
The renewed credit facility will expand the company’s borrowing capacity by $370 million to $1.5 billion and also extend the maturity date of the company’s revolving credit facility from 2012 to 2017.
Under a revolving credit facility, a company can borrow again once it repays all dues under the old credit facility. The company may utilize this fund for general corporate purposes, including repayment of outstanding commercial papers, working capital and capital investment or acquisitions.
Hyatt had no outstanding borrowings under the revolving credit facility as of June 30, 2011 and December 2010. The company, however, had $65 million and $71 million in letters of credit outstanding at June 30, 2011 and December 31, 2010, respectively. As of June 30, 2011, Hyatt’s debt-to-capitalization ratio remained at 13.8% and cash and cash equivalents were $876 million.
Management believes that the company’s capacity to generate strong cash flows, its robust balance sheet, and the renewed credit facility should provide substantial financial flexibility to fund growth. In the recently reported quarter, company repurchased 9 million shares for $396 million.
Hyatt, which competes with Red Lion Hotels Corporation (RLH) and The Marcus Corporation (MCS), currently holds a Zacks #2 Rank, implying a short-term Buy rating. We also have a long-term Neutral recommendation on the stock.
