Business Context and Reporting Period
This Form 8-K is filed by Wyndham Worldwide Corporation (Registrant) on March 28, 2018. The filing details material definitive agreements and other events related to the upcoming spin-off of Wyndham Hotels & Resorts, Inc. (Wyndham Hotels) and the planned acquisition of La Quinta Holdings, Inc.'s franchising and management businesses.
Key Financial Metrics and Agreements
- Debt Issuance: Wyndham Hotels priced a private placement of $500 million in senior unsecured notes due 2026.
- Interest Rate: The notes bear interest at 5.375% per year, payable semi-annually.
- Planned Credit Facilities: Wyndham Hotels expects to enter into a $1,600 million senior secured term loan B and a $750 million senior secured revolving credit facility.
- Use of Proceeds: Funds from the notes and credit facilities will finance the La Quinta acquisition, pay related fees, and serve general corporate purposes.
- Existing Debt Modifications: Amendments were made to the 2015, 2016, and 2017 Credit Agreements to allow Wyndham Hotels to incur indebtedness for the spin-off and acquisition prior to consummation.
Material Changes and Transaction Structure
The filing outlines significant changes to the company's capital structure in anticipation of the spin-off:
- 2017 Credit Agreement: Will terminate upon the occurrence of the spin-off.
- 2016 Credit Agreement: Will be prepaid upon the later occurrence of the sale of Wyndham Worldwide's European vacation rental business and the spin-off.
- 2015 Credit Agreement: Will terminate upon Wyndham Worldwide's incurrence of a new senior secured revolving loan facility post-spin-off. Commitments will be reduced from $1,500 million to $1,000 million upon the later occurrence of the European business sale and the spin-off.
- Guarantees: Wyndham Worldwide guarantees the new notes on a senior unsecured basis, but this guarantee will be released immediately prior to the consummation of the spin-off.
Outlook, Risks, and Contingencies
- Closing Date: The notes offering is expected to close on April 13, 2018, subject to customary and market conditions.
- Acquisition Contingency: The notes offering is not contingent on the La Quinta acquisition. However, if the acquisition is not consummated by July 17, 2018 (subject to extension), the notes are subject to a special mandatory redemption at 100% of principal plus accrued interest.
- Market Conditions: The amount of the planned Credit Facilities may be adjusted depending on market conditions.
- Regulatory Status: The notes and related guarantees have not been registered under the Securities Act and are offered pursuant to an exemption.
Investor Verification Checklist
- Confirm the closing of the $500 million notes offering on or around April 13, 2018.
- Monitor the status of the La Quinta acquisition to determine if the mandatory redemption clause (July 17, 2018 deadline) is triggered.
- Verify the execution of the new $1,600 million term loan and $750 million revolving credit facility by Wyndham Hotels.
- Track the completion of the spin-off of Wyndham Hotels from Wyndham Worldwide.
- Confirm the sale of Wyndham Worldwide's European vacation rental business, which impacts the prepayment of the 2016 Credit Agreement and reduction of the 2015 Credit Agreement.