CWT last week announced its intention to secure $250 million of new liquidity, including a $125 million injection by primary shareholder Carlson Inc. The restructuring extends the maturity dates of hundreds of millions in debt. It does not impact customers, according to a company spokesperson.

If it is completed as planned by July 14, the restructuring “will position the company to manage through the impact of Covid-19 on the business travel market,” according to a prepared statement attributed to Kurt Ekert, CEO and chair of the board of CWT parent Carlson Travel, Inc. (CTI). “We believe we will come out stronger on the other side of the recovery period.”

Moody’s Investors Service on July 10 responded to the announcement by stating that the plan likely would be considered a “distressed exchange,” which it defines as occurring “when a distressed company offers creditors new or restructured debt, or a new package of securities, cash or assets, that amounts to a diminished financial obligation relative to the original obligation. In doing so, a company can avoid a bankruptcy or push it off until market conditions improve.” Technically, a distressed exchange is considered a default.

“If successful, the restructuring will provide CTI with much-needed financial flexibility designed to help the company withstand the recovery period caused by the coronavirus,” according to Moody’s. “However, this will be at the expense of noteholders, who are being asked to accept new terms to avoid a potential default as a result of its untenable capital structure.”

“We view the debt exchange, if completed, as distressed and tantamount to a default because it extends the maturity beyond the original promise and because the new notes financed by certain noteholders will effectively lower the debt repayment priority of the existing secured and unsecured notes,” wrote Standard & Poor’s on July 10.

Fitch Ratings “expects business travel volumes to return to pre-Covid levels around 2024, which is similar to Fitch’s recovery time frame for leisure travel. However, in the near term Fitch anticipates business travel to rebound at a slower pace due to companies’ potentially reduced willingness to allow employees to travel and cancellation or rescheduling of group events.”

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