Marriott Plans to Continue to Slash Debt, CFO Says

Marriott had $8.7 billion in net debt at the end of 2021, down from $9.5 billion at the end of 2020. The company, which has been hit hard by the coronavirus pandemic, last year raised $1.8 billion in funding following debt sales in 2020 and before, according to S&P Global Market Intelligence.

U.S. interest rates, which are expected to rise in March from near zero, aren’t a major worry for the company, Ms. Oberg said, pointing to Marriott’s positive cash flow and its ability to adjust pricing on a regular basis.

Still, higher interest rates will have an impact on companies’ interest expenses, she said. Marriott spent $91 million on interest expenses during its latest quarter, down from $105 million during the prior-year quarter. The decline was largely due to the company’s debt reduction, the company said.

Ms. Oberg echoed comments from other finance chiefs at large U.S. companies in recent days who said that while financing costs are expected to rise, the impact on their finances will be limited given that interest rates are coming from a low base.

Many finance chiefs in recent months refinanced coming maturities and issued new debt to take advantage of low financing costs.

U.S. companies in the S&P 500, including those with a non-investment-grade rating, raised $676.75 billion in bonds in 2021, compared with $991.66 billion in 2020, according to Dealogic, a data provider.

There are $245.71 billion in bonds by S&P 500 businesses coming due in 2022, followed by $336.50 billion in 2023. S&P 500 companies have $194.19 billion in syndicated loans coming due in 2022 and $150.74 billion next year, Dealogic said.

Marriott could tap the debt markets on an opportunistic basis but doesn’t have to do so to refinance its maturing debt, Ms. Oberg said. The company also could pay its bondholders when the debt is coming due.

Marriott in recent years extended its weighted average maturities, with a portion of its debt carrying tenures of between 10 and 12 years, she said. About 10% to 15% of its debt has floating rates, which fluctuate over the duration of the contract.

The company’s revenue rose to $13.86 billion in 2021, up 31% from 2020 but still lower than the $20.97 billion reported for 2019, before the pandemic. Cash and cash equivalents rose to $1.4 billion last year, up from $900 million in 2020.

Marriott’s ratio of net debt to earnings before interest, tax, depreciation and amortization stood at 4.3 times at the end of 2021, down from 4.5 times in 2019 before Covid-19, according to Dan Wasiolek, a senior equity analyst at Morningstar Inc.’s research arm.

The company has done “a pretty good job pushing out maturities and taking advantage of the low-interest rate environment,” said Richard Hightower, an analyst at Evercore ISI, the research arm of the financial-services firm. Going forward, the company will likely face some headwinds from higher interest rates, Mr. Hightower said.

Marriott will likely work on improving its balance sheet further before it begins returning cash to shareholders, said Richard Clarke, a managing director at investment management firm AllianceBernstein.

Marriott’s Chief Executive Anthony Capuano said Tuesday the company could resume returning cash to shareholders later this year if there is no further meaningful slowdown in the global economic recovery. Marriott suspended its quarterly dividend in March 2020 and hasn’t repurchased shares since the first quarter of 2020.

Write to Nina Trentmann at [email protected]