Investors Overbook Marriott Bond

Hotel giant Marriott International (Nasdaq: MAR) priced US$1.6bn worth of investment-grade notes to stellar demand, despite the beleaguered hospitality industry’s continued suffering from travel bans and drop in tourism.

High-grade corporate debt sales have been surging recently amid the Federal Reserve’s recent actions to support the economy, with another hefty round of offerings Tuesday that tallied nearly US$13.5bn. 

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Hospitality companies hammers by virus induced travel and tourism drop

Among the deals, Bethesda, Maryland-headquartered Marriott entered the high-grade corporate primary market with a ‘BBB’-rated, five-year fixed-rate note sale, which priced to yield 5.75% at maturity.

The yield on the five-year U.S. Treasury note Tuesday was bid at around 0.424%.

Marriott said it intends to use the net proceeds from the sale for general corporate purposes, which may include working capital, capital expenditures, acquisitions or repayment of outstanding commercial paper or other borrowings.

The issuance, jointly led by BofA SecuritiesJ.P. MorganGoldman SachsDeutsche Bank Securities and US Bancorp, was a testament to the recent fervor among fixed-income investors – having upsized by US$600m from its original amount and selling at a yield that was roughly 150 basis points lower than its initial price talk.

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Pricing evolution of Marriott's 5.57% May 2025

The order book on the offering was also touted as having been oversubscribed by around 20x – for a whopping total of around US$20bn.

However, while bond investors have been generally more optimistic about high-grade credits, lodging and leisure-related businesses continue to combat a virus-spurred plunge in consumer spending, with occupancy rates at U.S.-based hotels likely to remain at significantly low levels for a prolonged period.

Marriott, for example, has been contending with a host of COVID-19-induced dilemmas, including material declines in revenue per available room (RevPAR), as well as a recent rating downgrade.

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The author does not hold any positions in the financial instruments referenced in the materials provided.

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