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Sabre (SABR) Extends Debt Maturity With New Refinancing Plan

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Sabre Corporation (SABR - Free Report) recently announced the refinancing of its Term A loans along with the redemption of Sabre GLBL’s Senior Secured Notes. Per the terms, the company’s wholly-owned subsidiary, Sabre GLBL, has borrowed a $637-million term loan "B" facility under the existing senior secured credit agreement.

The company intends to utilize the proceeds for the repayment of the existing Term A Loans in full (roughly $134 million) and redeem Sabre GLBL's $500-million outstanding 5.250% Senior Secured Notes, which were due November 2023.

The new credit facility will mature on Dec 17, 2027. Further, it allows the prepayment of the $637-million term “B” facility after 12 months or at a 101 premium before 12 months.

Sabre holds a large amount of debt on its balance sheet, which does not bode well for its risk profile. As of Sep 30, 2020, Sabre’s long-term debt stood at $4.64 billion against the cash and cash equivalents of $1.67 billion. This leaves the company with a significant net debt of $2.97 billion.

According to the company, the recent refinancing will not increase its debt, except the amounts incurred on interest, fees and expenses in connection to the repayment of the Term A Loans. Moreover, the initiative has preserved the company’s financial flexibility and improved the debt-maturity profile.

Moreover, Sabre’s current ratio of 3.03 as of Sep 30, 2020, increased sequentially from 2.27 as of Jun 30, 2020, and 1.23 as of Mar 31, 2020. This reflects the company’s strong liquidity position, which is a positive amid the coronavirus-induced business disruptions.

Cost-Saving Measures to Survive Coronavirus Crisis

Meanwhile, Sabre’s shares have declined 46.2% year to date against the Zacks Internet - Software and Services industry’s growth of 48.2%.

Coronavirus-induced travel bans and shelter-in-place guidelines remain an overhang for the travel industry. Consequently, travel network companies like Sabre, which provides software and technology solutions to the travel and tourism industry, have largely suffered from the current crisis.

In September, Sabre readjusted its capital structure to enhance its cash on hand and extend its debt-maturity profile. The company generated roughly $598 million in proceeds (net of commissions) from its equity offerings, thereby increasing its cash on hand.

Moreover, the company extended the scheduled maturity of a major portion of its debt through the issuance of an $850-million aggregate principal amount of new senior secured notes, which are due 2025. The company also extended maturity with respect to a portion of its existing bank facility.

These measures are aimed to improve Sabre’s liquidity position and boost its cost savings to survive the pandemic-led disruptions. In the September press release, the company stated that it expects $275 million in cost savings in 2020.

Zacks Rank & Stocks to Consider

Sabre currently has a Zacks Rank #5 (Strong Sell).

Some better-ranked stocks in the broader technology sector are Qorvo (QRVO - Free Report) , CDW Corporation (CDW - Free Report) and Microsoft (MSFT - Free Report) . Qorvo sports a Zacks Rank #1 (Strong Buy) while CDW and Microsoft carry a Zacks Rank #2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Qorvo, CDW and Microsoft is pegged at 15.8%, 13.1% and 12.5%, respectively.

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