Hilton Grand Vacations Inc. (“HGV” or “the Company”) provides an update on its business in response to the rapidly evolving situation surrounding the COVID-19 pandemic.
Business Update and Mitigation Initiatives
In light of the growing number of local, state, federal, and international travel restrictions and shelter-in-place mandates, HGV has elected to suspend its U.S. sales operations at this time. In addition, the Company has closed several of its resorts and elected to temporarily pause new reservations at its U.S., Europe, and Barbados resorts through the end of April. HGV’s sales operations in Japan and South Korea remain open on a limited basis. The Company’s customer service team members continue to assist owners who wish to book, cancel or modify their travel. HGV has also enacted its remote work policies to maintain continuity with its call transfer operations and corporate functions while promoting social distancing.
“The safety of our team members, owners and guests remains our paramount concern in this time of global crisis,” said Mark Wang, president and CEO of Hilton Grand Vacations. “While the level of disruption to the travel industry is unprecedented, we remain confident in our ability to manage through this difficult period. Approximately 40% of 2019 segment EBITDA was derived from recurring fees in our Finance and Club & Resort segments. Through the end of March, we have collected approximately 90% of our member fees for fiscal 2020, which fund all of the operational costs of our resorts. We have continued to see a healthy level of inquiries from owners interested in booking stays when business resumes, and we believe that our strong inventory pipeline and focus on net owner growth has built a solid foundation of engaged owners that positions us well for the return of leisure travel as the pandemic subsides.”
Mr. Wang continued: “We have a conservative balance sheet, and we are taking the appropriate steps to reduce our operational cost structure and preserve our cash flow. We have also implemented proactive measures to extend the payment schedules for some of our upcoming projects with minimal impact to our planned sales launches, which allows us to defer up to $200 million of budgeted inventory spend for the year, if necessary. Finally, we have paused our share repurchase program.”
Leverage and Liquidity Position
At the end of February, HGV’s leverage ratio was 1.59x and the Company had just over $1 billion in liquidity, including $102 million of unrestricted cash, $485 million of availability on an $800 million revolving credit facility, and an undrawn $450 million warehouse facility. The Company’s bank facilities are not due until November of 2023, followed by its 6.125% Senior Unsecured Notes, which are due in December 2024. Over the course of March, the Company substantially drew down the remainder of its revolving credit facility as a precautionary measure. The revolver draw is not expected to alter the Company’s net debt position as a result of holding excess cash in reserve.
“We entered the year with a strong liquidity position and took steps in March to further bolster our cash position by drawing on capacity available on our credit facility,” said Dan Mathewes, CFO of Hilton Grand Vacations. “In late March, we raised $195 million of cash by borrowing against receivables collateral through our warehouse facility, bringing our unrestricted cash position to approximately $700 million. This facility, which was set up in the wake of the global financial crisis, allows us to borrow against pledged receivables on a non-recourse basis at attractive interest rates and generate cash regardless of the term securitization markets.”