Money is murky.
Money transiting Luxembourg through a collage of lenders and guarantors intends to deprive a government or two somewhere of tax revenue.
A Cayman Island private equity fund shepherded by KKR and KSL Partners, Casablanca, has agreed to accept $2.7 billion for a resort management company the Apple Leisure Group that had $1.2 billion of 2019 reported revenue and $168 million EBITDA with a catch. The EBITDA is not US GAAP EBITDA, a neat footnote in the presentation, but something other. Presumably the revenue is revenue not composed of vacations booked at adult-only resorts in the Caymans not taken. Lets take KKRs word for it.
The buyer, the Hyatt corporation, or some amalgamation of Hotel Investors I Luxembourg, waxed philosophic on the plan to expand with the acquisition of a company for which the numbers may not be the numbers. The simple math is that the Apple Leisure Group claims to have 110,000 active members for which Hyatt is paying $25,000 a member to travel and spend at resorts to which they can not travel.
The Apple Leisure Group management was kind enough to supply projections for 2023 that Hyatt management inspected with the monocle of a double-entry bookkeeper. The banks, Bank of America the administrator, to whom Hotel Investors I approached to pay Casablanca Partners, Apple Leisure, observed that certain inconvenient negative covenants in the lending agreement would have to be waived for the money to be borrowed and spent. The pesky detail that Apple Leisure had not complied with US accounting standards, GAAP, that as an acquired company Apple Leisure would then become a guarantor under the lending facility, and that until Apple Leisure complied, which depended on travelers not able to travel, traveling, the covenants would have to be modified.
The transaction was so compelling that Hyatt insiders have been selling anything not nailed down, $150 million, and the Chairman Mr Thomas Pritzker joined by exercising Stock Appreciation Rights at $41 selling half at $73 before gravity tugged on the zero bound of credulity. Mr Pritzker has an appreciation for acquisitions built the hologram of expected future earnings when he bought his brother's business for $400 million in 2018 based on 2021 stabilized earnings without a scent of disclosure or the underlying real estate which his brother kept and repackaged along with a Chinese partner.
Comments