Skift Take

A new chapter that will help the agency focus on the future, but will an opaque ownership structure hinder its recovery plans?

Corporate travel agency CWT hopes to draw a line under a tumultuous 18 months with a major financial restructuring, which will see the family-owned Carlson group switch from majority to minority stakeholder.

CWT, which up until 2019 was known as Carlson Wagonlit Travel, has entered into an agreement with its equity owners, as well as firms that represent more than 90 percent of the company’s outstanding debt, to recapitalize the business.

Terms of the agreement, entered into with financial stakeholder Barings, among others, include adding $350 million of new equity capital into the business, and eliminating almost $900 million of debt by replacing its existing $1.5 billion in debt with a new first lien debt of $625 million and an undrawn revolving credit facility. First lien debt holders are paid back before all other debt holders in the event of a default.

As a result of these manoeuvrings, the Carlson holdings ownership will be diluted, according to CWT CEO Michelle McKinney Frymire, who replaced Kurt Ekert in May.

The refinancing, which is expected to complete by the end of the year, doesn’t involve any new parties coming to the table — which may come as a surprise after previous refinancing and other speculation. One industry source told Skift in September last year that CWT would make an attractive acquisition target. “I see them being a net loser unfortunately, and there are others out there who might take an opportunistic approach and make a consolidation play,” they said at the time.

Rumors also circulated that private equity firm Certares, which this week invested $354 million in an aerospace services firm, was looking at the company.

“All of the parties involved are existing investors, and they’re all really well regarded institutional investment managers,” said McKinney Frymire. “They understand the business, and have been incredibly supportive of the company and our strategy … CWT will remain an independent standalone company, we will have a number of debt holders who will become equity holders, many of whom already have some small portion of equity.”

McKinney Frymire also doesn’t envisage job cuts in the future. “Optimizing the operational footprint of the company, flattening the organization, we’ve done a lot of that work already,” she said.

CWT has been radically slimming down over the past few of years. In 2019 it axed several country director roles, and later transferred other regions into cross-functional market management teams.

McKinney Frymire said there were currently 500 positions the company was looking to fill around the world.

Meanwhile, the restructure leaves CWT with a generous $400 million of available liquidity on the balance sheet. It claimed this is the largest amount among its peers, but the money won’t be directed towards acquisitions, which has been a major trend during the pandemic.

“We’re focused on our people and technology,” McKinney Frymire said. “That’s not to say we wouldn’t take advantage if we thought there was an opportunity that made sense.
But it’s not an intentional focal point.”

Beyond the Pandemic

Now the calculations have been made, McKinney Frymire said she wants to put the business in a position to take advantage of the recovery in business travel. She’s been out talking to her biggest customers, where the news was “universally and very positively received.”

Yet it marks a significantly different chapter with its former namesake taking a back seat. Carlson was founded in 1938 in the U.S. state of Minnesota by Curt Carlson, with Carlson Wagonlit Travel formed in 1994 following its partnership with France’s Wagonlit Travel, which was owned by Accor.  Accor sold its share in the company in 2006.

But CWT is keen to point out that its rebrand in 2019 meant the company was no longer called Carlson Wagonlit Travel, despite the initials. Now, Carlson will retain some stake, but the exact percentage is still to be determined.

“Having over 90 percent of the debt holders in this agreement is really remarkable, and demonstrates the support our financial stakeholders have for the business,” McKinney Frymire added.

That show of support for the ailing travel agency also demonstrates a certain level of faith in the corporate travel sector’s potential to rebound. So much so, they’re literally banking on it.


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Tags: carlson wagonlit travel, certares, cwt, travel management

Photo credit: CWT is headquartered in Minneapolis in the U.S. Gregory Hayes / Unsplash

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