New Issue Analysis: Ctrip. com (CTRP) Convertible Senior Notes Due 2022
September 06, 2016
Kathy Schick
Introduction
CTRP announced it was issuing $750 million of senior convertible notes today. The company is a repeat offender several times over, with four public issues already outstanding and another four private issues with Priceline and Hillhouse. The company is also concurrently offering 22.5 million American Depositary Shares. The proceeds from both deals will be used to fund organic growth, for acquisitions and investments in complementary businesses and assets, and for other general corporate purposes.
CTRP is the Chinese equivalent of Priceline. The company offers hotel reservations, airline, train and bus ticketing, and packaged tours to corporate and leisure travelers.
More about the bond…
The initial mid-point of price talk for the bonds is 1.5% up 40%. The bonds mature in 2022 and have a put in 2019. Using those terms, the initial HOCS score is 74 Overall / 83 Growth / 57 Safety. That is a great score, though heavily weighted toward growth. Revenue growth continues to be robust driven by both the consolidation of Qunar starting in the fourth quarter of 2015 and opportunities in the online travel market in China. The safety score is constrained by the high debt levels, in the absolute and relative to the equity market valuation, and the slim profit and EBITDA margins.
More about the credit…
CTRP is experiencing strong revenue growth, in part fueled by the Baidu transaction in late 2015 which gave the company a 45% interest in Qunar, the number two online travel-services provider in China. Together Qunar and CTRP represent 70% of China’s online travel business. Online travel accounted for only about 10% of total Chinese travel in 2015, leaving significant room for growth. In the second quarter, which the company reported last week, revenue increased 75% year-over-year to $664 million. Management guided for revenue growth to be in the range of 70% to 75% for the third quarter.
The company has about $1 billion of short-term secured borrowings outstanding and a total of eight convertible bonds, which total $3.7 billion. Three of those converts were issued privately to Priceline as part of the company’s strategic partnership. Together with stock options, Priceline could own up to 15% of the common stock. In return CTRP gained access to the international travel business outside of China. CTRP also has $500 million in converts issued privately to Hillhouse.
The existing 1% of 2020 converts receive a HOCS slash line of 53 / 61 / 38 with the bonds at 112 versus $45.33. The 2% of 2025 converts (puttable 2018) receive a HOCS slash line of 60 / 79 / 21 with the bonds at 118.75 versus $45.33.
Summary Financials
(LTM Pro Forma) ($MM)
Revenues 2,267
Adj. EBITDA * 108
Total Cash 4,220
Total Debt 5,423
(*Fiscal year 2015 adjusted EBITDA)
Sources: Company filings and Hillside Advisors
Kathy Schick
Introduction
CTRP announced it was issuing $750 million of senior convertible notes today. The company is a repeat offender several times over, with four public issues already outstanding and another four private issues with Priceline and Hillhouse. The company is also concurrently offering 22.5 million American Depositary Shares. The proceeds from both deals will be used to fund organic growth, for acquisitions and investments in complementary businesses and assets, and for other general corporate purposes.
CTRP is the Chinese equivalent of Priceline. The company offers hotel reservations, airline, train and bus ticketing, and packaged tours to corporate and leisure travelers.
More about the bond…
The initial mid-point of price talk for the bonds is 1.5% up 40%. The bonds mature in 2022 and have a put in 2019. Using those terms, the initial HOCS score is 74 Overall / 83 Growth / 57 Safety. That is a great score, though heavily weighted toward growth. Revenue growth continues to be robust driven by both the consolidation of Qunar starting in the fourth quarter of 2015 and opportunities in the online travel market in China. The safety score is constrained by the high debt levels, in the absolute and relative to the equity market valuation, and the slim profit and EBITDA margins.
More about the credit…
CTRP is experiencing strong revenue growth, in part fueled by the Baidu transaction in late 2015 which gave the company a 45% interest in Qunar, the number two online travel-services provider in China. Together Qunar and CTRP represent 70% of China’s online travel business. Online travel accounted for only about 10% of total Chinese travel in 2015, leaving significant room for growth. In the second quarter, which the company reported last week, revenue increased 75% year-over-year to $664 million. Management guided for revenue growth to be in the range of 70% to 75% for the third quarter.
The company has about $1 billion of short-term secured borrowings outstanding and a total of eight convertible bonds, which total $3.7 billion. Three of those converts were issued privately to Priceline as part of the company’s strategic partnership. Together with stock options, Priceline could own up to 15% of the common stock. In return CTRP gained access to the international travel business outside of China. CTRP also has $500 million in converts issued privately to Hillhouse.
The existing 1% of 2020 converts receive a HOCS slash line of 53 / 61 / 38 with the bonds at 112 versus $45.33. The 2% of 2025 converts (puttable 2018) receive a HOCS slash line of 60 / 79 / 21 with the bonds at 118.75 versus $45.33.
Summary Financials
(LTM Pro Forma) ($MM)
Revenues 2,267
Adj. EBITDA * 108
Total Cash 4,220
Total Debt 5,423
(*Fiscal year 2015 adjusted EBITDA)
Sources: Company filings and Hillside Advisors
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