Booking filed an 8K this morning giving some updates on their business. Overall, no reason for additional concern – I think this is consistent with expectations and the stock is up 2% this morning. They indicated room night reservations (excluding the impact of cancelations) in recent days have decreased by over 85% as compared to the comparable period in 2019. This is consistent with reports by hotel operators of occupancy in the single digits. They also said they expect Q2 ending June 30 to be materially worse than Q1 given the timing of the virus outbreak. Booking also announced a debt offering and some changes to their debt covenants which should prevent them from potentially tripping a covenant. Specifically, they replaced a leverage ratio covenant with a liquidity covenant which requires them to have a certain amount of cash on hand. Additionally, they gave some insight into their liquidity situation. Basically they said prior to their current debt offering and without accessing their revolving credit facility ($2B) they believe if their current weakened business volumes persist indefinitely, their current liquidity will be sufficient through at least the end of 2021. If the situation worsens, current liquidity will be sufficient at least until the second half of 2021. To put that in perspective, their business is very Europe focused and Europe is in lockdown, but cases in Spain and Italy seem to be levelling off. So a situation worse than now through mid-2021 seems unlikely. Moreover, this liquidity outlook does not incorporate their current debt offering or their $2B revolver that they can access. On March 24, 2020, Moody’s affirmed their A3 senior unsecured debt rating (this is in the middle of the investment grade credit ranking), but they did change the outlook to negative from stable.
Sarah Kanwal
Equity Analyst, Director
Direct: 617.226.0022
Fax: 617.523.8118
Crestwood Advisors
One Liberty Square, Suite 500
Boston, MA 02109
BKNG.US
[tag BKNG]
[category equity research]