Thu 08/06/2020 13:01 PM
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The loans of Spanish tourism and leisure companies including Portaventura, Parques Reunidos and Hotelbeds have come under pressure in recent weeks as Covid-19 cases spiked in Spain and some other European countries alongside the introduction of regional lockdowns. Continue reading for the EMEA Core Credit by Reorg team's analysis of these distressed debt situation, and request access to continue following.

Both Parques Reunidos’ €970 million cov-lite term loan B and Portaventura’s €620 million term loans have decreased by 4-5 points since the end of July and are quoted in the low 80s. Spanish B2B hotel accommodation provider Hotelbeds also saw its €1 billion senior secured term loans B decline by 3 to 4 points to the low 70s.

Several European countries have advised their citizens not to travel to Spain or certain Spanish regions or asked returning citizens to self-quarantine. This in combination with potential further restrictions is expected to hurt Parques Reunidos, Portaventura and Hotelbeds’ earnings.

Parques Reunidos operates theme and amusement parks in a dozen countries and its debt includes a €1.17 billion guaranteed senior secured term loan B due 2026 (which includes the €970 million guaranteed senior secured term loan B and a €200 million incremental guaranteed senior secured term loan B2) and a €200 million guaranteed senior secured revolving credit facility due 2026. The company's debt has one springing net leverage covenant tested only when the €80 million RCF minus cash is drawn by more than 40%.

Due to the pandemic, Parques Reunidos’ revenue was down by about 30% year over year in the first quarter 2020, according to Moody’s, The credit rating agency said it expects revenue in the second quarter to be close to zero and revenue for the full year to be down by 45%. Free cash flow is also expected to be negative for the full year. Sources say Parques Reunidos is relatively well diversified geographically, which makes the company more resilient to Covid-19 outbreaks in a particular country, however a big part of the revenue comes from Spain and the U.S. where Covid-19 is still prevalent. Some investors also say it could take a long time for the company to return to growth given that the business was struggling to generate significant cash flows before the crisis.

Portaventura is an amusement park in Spain with a €620 million senior secured term loan maturing 2024. In a ratings update in March, Moody’s warned that the group’s revenue are likely to decline by 50% in 2020. The group generates more than 85% of its EBITDA between April and September, according to the ratings agency. Sources told Reorg the park is currently operating at 30% capacity. Some investors have concerns over the company’s single asset strategy, which makes it more susceptible to rising Covid-19 cases in Spain.

Hotelbeds is a B2B distributor of hotel accommodation (bedbank) and other travel inventory, headquartered in Palma De Mallorca. The group loan facilities consist of about:

  • €1 billion of senior secured term loan Bs and Cs due September 2023, paying Euribor+3.25% subject to a margin ratchet;

  • A €400 million senior secured term loan add-on due September 2025 raised last year to finance a €490 million dividend recap paying E+4.5%; and

  • A €247.5 million senior secured revolving credit facility due September 2022 paying 4.5%, borrowed by HNVR Holdco limited, a subsidiary of HNVR Midco Limited.

The company’s RCF carries a consolidated total net debt/consolidated EBITDA 8.5x covenant triggered when at least 30% of the RCF is drawn.
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