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Hilton Pre-Sells $1 Billion Loyalty Points to Amex

Hilton Worldwide Holdings Inc. is raising cash by selling loyalty points amidst the travel industry halt due to the coronavirus

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As COVID-19 continues to spread and strict healthcare regulations force would-be travelers to stay indoors, hotels around the world are dealing with the financial impact of the sector’s virtual halt. Following United Airlines Holdings and Delta Air Lines and their respective credit-card partners, JPMorgan Chase and American Express talk about selling their miles ahead of schedule and at a lower price range in order to raise cash, and Hilton is selling loyalty points to American Express towards its co-branded credit card program.

“In April 2020, we pre-sold Hilton Honors points to American Express for $1B in cash. American Express and their respective designees may use the points in connection with the Hilton Honors co-branded credit cards and for promotions, rewards and incentive programs or certain other activities as they may establish or engage in from time to time. We will use the proceeds from the Hilton Honors points sales for working capital, general corporate and other purposes,” Hilton (HLT) said in a regulatory filing.

The company plans to use the proceeds for working capital and general corporate purposes. It also plans to offer $500 million in senior unsecured notes, the company said in a filing. Earlier, the hospitality giant has suspended operations at nearly 1,000 hotels (about 16% of its portfolio) and revenue per available room declined as much as 58% in March, according to the company’s preliminary estimates.

“As Hilton disclosed today, we pre-purchased $1 billion worth of Hilton Honors points toward our co-branded credit card program that we manage together, which we may use for future promotions, rewards and incentive programs for our joint customers. The points pre-purchase program is part of a pre-existing contractual agreement between American Express and Hilton that was negotiated in prior years and already contemplated in our capital and liquidity planning,” reads Amex press-statement.

Hilton, along with Boeing and Wynn Resorts, had to tap credit lines last month to boost cash amid the coronavirus pandemic. Hilton drew out a $1.75 billion loan mid March. As the coronavirus situation continues evolving, the travel and hospitality industry are looking for ways to stay in business. The recent 1 million room donation from Hilton and American Express are even more admirable given the current financial state of the industry that might not get better in the near future.

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