Online travel corporations are attempting to lessen the financial blow of the COVID-19 coronavirus pandemic by resorting to a host of cost-cutting measures such as lowering executive pay, implementing hiring freezes and reducing discretionary spending.
Could past addictions to corporate debt help explain these decisions?
According to a recent report from the Organization for Economic Cooperation and Development, the outstanding stock of non-financial corporate bonds reached a record of $13.5 trillion at the end of 2019.
For years, corporations took advantage of historically low-interest rates and relied on taking out debt in order to invest in new projects and propel growth.
If revenue drops due to COVID-19, online travel companies will be less likely to make debt payments. These companies will find it more challenging to survive economic obstacles and they will have some tough decisions.
Excluding maturities, Expedia Group’s long-term debt grew from $3.71 billion in 2018 to $4.18 billion in 2019.
At the end of 2019, the Seattle-based online travel agency had a $2 billion unsecured revolving credit facility that “was essentially untapped.”
On March 18, days after withdrawing its 2020 guidance, Expedia Group borrowed $1.9 billion under its credit agreement.
Cash and cash equivalents increased from $2.4 billion in 2018 to $3.3 billion in 2019.
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