It’s not exactly a secret that the travel industry is in free fall right now as the pandemic has brought the industry to a screeching halt. With nobody moving, travel site Expedia announced that it has raised $3.2 billion to help ride this out.
The deal consists of two separate tranches of cash with $1.2 billion coming from private placement of perpetual preferred stock and approximately $2 billion coming from new debt financing, according to the company.
Apollo Global Management and Silver Lake will be providing the funds to give the company some capital to help make it to the other side of the coronavirus pandemic. Apollo partner Reed Rayman sees a solid company going through a rough time.
“This investment helps ensure the company has the resources to sustain market leadership and emerge from the current economic environment stronger than ever,” Rayman said in a statement. While it may not emerge stronger than ever, certainly having a significant chunk of operating capital will help ensure that it simply emerges whenever this industry slump ends.
In addition, the company is making big changes in the executive team, naming vice chairman Peter Kern as CEO and company veteran Eric Hart as CFO. The company also announced these executives and members of the board will forgo salary for the remainder of the year, and senior executives will take a 25% pay cut.
In a press release, company chairman Barry Diller outlined all of the steps the company was taking, but he indicated that the management changes had been in the works even prior to the crisis that has overtaken the company and the entire industry.
As a result of the ongoing industry issues, the company will be forced to go lean and that means furloughs and reduced work weeks for certain volume of employees, at least through August 31st. The company will also be suspending 401(k) matching for the remainder of the year and asking employees to voluntarily reduce work weeks, as well.
Diller wrote that they were forced to make these moves to survive the precipitous drop in travel due to the pandemic and subsequent worldwide lockdowns.
“Since the crisis began, the company has encountered an extraordinary number of challenges, and just as governments around the world were unprepared, so too were we. We had limited online tools to support widespread cancellations and our call volume spiked 500%. Under extraordinary pressure, our tech teams built new tools and managed to bring our call center capacity to acceptable levels,” he said in the letter.
He closed his letter on a positive note, stating these moves will help them hunker down with enough cash to survive until it’s over. “We have the financing to carry us through, a superb newly named senior management team, and a very clear focus for whatever the future brings. So, we’ll seize the (next) day…,” he wrote. These moves should help them get there.