While security and stability are always clear priorities for corporate treasurers, decisive steps were essential in the wake of Covid-19 to shore up liquidity and prepare for the inevitable slowdown across most industries globally.
The situation was no different for Booking Holdings, the travel technology firm. Despite a well-managed and highly-liquid balance sheet, it too had to rethink its capital structure.
This was the basis of the video interview further below – recorded during CTWeek 2021 in late April – where Yang Xu, vice president and global treasurer of Kraft Heinz, asks Douglas Tropp, senior vice president and treasurer at Booking Holdings, to outline the measures the firm took and the lessons it has learned in the process.
Click the image below to watch the full interview.
Booking Holdings’ conservative financial policy, including a liquid portfolio of cash-like securities, ensured it could count on around $5 billion of obligation-free cash at the time Covid-19 hit
Yet given the outlook for the pandemic by the second quarter of 2020 – and the worst-case expectations of the impact on travel – Tropp realised the need to run models that allowed for zero revenue over an extended period
Adding to the challenge was the knowledge that around $4 billion of Booking Holdings’ debt maturities were scheduled to mature between 2020 and 2022. At the same time, Tropp said the firm realised that while its $2 billion revolver was untapped, its worst-case projections would result in the firm soon being in default of the covenants
As a result, Booking Holdings issued $4 billion worth of bonds in April 2020 with a view to riding out the pandemic – supported also by a constructive banking relationship
From a liquidity management perspective, the firm also benefitted from its model where one of its largest expenses are travel related – so the halt in activity amid the pandemic meant that Booking Holdings incurred significantly less cost
Once the firm had secured its balance sheet and had comfort in being able to survive the Covid-19 crisis, Tropp said the focus shifted to liability management to lower the cost of the debt it issued during the pandemic
This approach, benefitting from the more positive investment environment compared with April 2020, resulted in the firm saving around 400 basis points on $1.75 billion of debt
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