Item 1.01 Entry into a Material Definitive Agreement.
Indenture with respect to 3.625% Senior Notes due 2032
On February 2, 2021, Hilton Domestic Operating Company Inc. (the “Issuer”), an indirect subsidiary of Hilton Worldwide Holdings Inc. (the “Company”), issued and sold $1.5 billion aggregate principal amount of 3.625% Senior Notes due 2032 (the “Notes”) under an Indenture, dated as of February 2, 2021 (the “Indenture”), by and among the Issuer, the Company, as a guarantor, the other guarantors party thereto, and Wilmington Trust, National Association, as trustee (in such capacity, the “Trustee”). The Notes were sold only to persons reasonably believed to be qualified institutional buyers in reliance on the exemption from registration provided by Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and to non-U.S. persons outside the United States in reliance on Regulation S under the Securities Act.
The Notes were issued at 100% of their par value and bear interest at a rate of 3.625% per annum. Interest on the Notes is payable semi-annually in arrears on February 15 and August 15, beginning August 15, 2021. The Notes mature on February 15, 2032.
The net proceeds of the offering of the Notes, together with available cash, were used to redeem all $1.5 billion in aggregate principal amount of the Issuer’s outstanding 5.125% Senior Notes due 2026 (the “2026 Notes”), and to pay the related redemption premium and all fees and expenses related thereto.
Ranking; Guarantees
The Notes are the Issuer’s senior unsecured obligations, ranking equally in right of payment with all of the Issuer’s existing and future senior indebtedness and senior in right of payment to all of the Issuer’s existing and future subordinated indebtedness.
The Notes are guaranteed, on a senior unsecured basis, by (i) Hilton Worldwide Parent LLC (“HWP”), the Issuer’s direct parent company, (ii) the Company, the immediate parent company of HWP, and (iii) each of the Issuer’s existing and future wholly owned subsidiaries to the extent such entities guarantee indebtedness under the Issuer’s senior secured credit facilities or certain other indebtedness of the Issuer or any subsidiary guarantor.
Optional Redemption
The Issuer may, at its option, redeem the Notes, in whole or in part, at any time prior to August 15, 2026, at a price equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date, plus the applicable “make-whole premium.” In addition, beginning on August 15, 2026, the Issuer may redeem all or a part of the Notes at a redemption price equal to 101.813% of the principal amount redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. The redemption price decreases to 101.208%, 100.604% and 100.000% of the principal amount redeemed on August 15, 2027, August 15, 2028 and August 15, 2029, respectively. In addition, at any time on or prior to February 15, 2024, the Issuer may, at its option, redeem up to 40.0% of the aggregate principal amount of the Notes issued under the Indenture with the proceeds of certain equity offerings at a redemption price of 103.625% of the principal amount thereof, plus accrued and unpaid interest.
Repurchase at the Option of Holders
Upon the occurrence of a change of control triggering event or upon the sale of certain assets in which the Issuer and its restricted subsidiaries do not apply the proceeds as required, the holders of the Notes will have the right to require the Issuer to make an offer to repurchase each holder’s Notes at a price equal to 101% (in the case of a change of control triggering event) or 100% (in the case of an asset sale) of their principal amount, plus accrued and unpaid interest.
Covenants; Events of Default
The Indenture contains covenants that, among other things, limit the ability of the Issuer and its restricted subsidiaries to incur additional indebtedness or issue certain preferred shares, pay dividends, redeem stock or make other distributions, make certain investments, sell or transfer certain assets, create liens, consolidate, merge, sell or otherwise dispose of all or substantially all of the Issuer’s assets, enter into certain transactions with affiliates, and designate subsidiaries as unrestricted subsidiaries. These covenants are subject to a number of important exceptions and qualifications. Neither HWP nor the Company is subject to the restrictive covenants of the Indenture. The Notes also contain customary events of default, the occurrence of which could result in the principal of and accrued interest on the Notes to become or be declared due and payable.
The foregoing description of the Indenture and the Notes does not purport to be complete and is qualified in its entirety by reference to the full text of each of such documents, which are filed as Exhibits 4.1 and 4.2 to this Current Report on Form 8-K and are incorporated herein by reference.