Investing.com -- Moody’s Ratings has raised the corporate family rating (CFR) and probability of default rating (PDR) of Global Business Travel Group, Inc. (Amex GBT) to B1 from B2. The ratings for the company’s senior secured bank credit facilities, issued at GBT US III LLC, an indirect subsidiary of Amex GBT, have also been increased to B1 from B2. Additionally, the speculative grade liquidity rating (SGL) of the New York-based global business travel management company was upgraded to SGL-1 from SGL-2. The outlook for both issuers remains stable.

The upgrade is a reflection of the strong business momentum and substantial deleveraging of Amex GBT since the initial rating assignment in 2024. Moody’s Ratings analyst, Oleg Markin, expects the company to continue its strong double-digit EBITDA growth and margin expansion by focusing on productivity and leveraging automation tools while investing in long-term growth initiatives. The upgrade also takes into account Amex GBT’s strong balance sheet and free cash flow generation, as well as the expectation that the company will maintain its public long-term net leverage target of 1.5x-2.5x.

Amex GBT’s debt-to-EBITDA ratio improved to around 4.8 times as of December 31, 2024, from about 6.6 times in 2023. In 2024, the company expanded its adjusted EBITDA by about 26% while growing revenue organically at around 6%, and its free cash flow more than tripled compared to the prior year. Moody’s projects the company’s debt-to-EBITDA leverage to trend towards 4.0 times by 2026. It is believed that the company’s focus on cost reductions and accelerating cash flow generation will result in free cash flow to debt sustaining around 10% through 2026.

Amex GBT is currently awaiting regulatory approval for its acquisition of CWT Holdings LLC (Carlson Wagonlit Travel or CWT). While the UK Competition and Markets Authority has approved the deal, the U.S. Department of Justice’s lawsuit challenging the merger is scheduled for trial in September 2025. Assuming the acquisition proceeds as planned, the debt-free purchase of CWT is unlikely to negatively affect Amex GBT’s credit profile.

Amex GBT’s B1 CFR is supported by its significant global scale and position as a leading provider of B2B corporate travel and expense software and services to large-to-medium-sized companies. The company’s strong supplier relationships, breadth of technology-enabled solutions, and a long-standing client base with client retention rate of around 97% in 2024, further support the rating. Despite economic uncertainty potentially leveling off global corporate travel volume in 2025, new customer wins should keep Amex GBT growing above the industry average.

The company’s rating also considers the high but quickly moderating debt-to-EBITDA leverage and revenue base that is exposed to the cyclical and discretionary nature of corporate travel services. The rating also takes into account the highly competitive and fragmented global travel industry within which the company operates, and its acquisitive growth strategy. Amex GBT’s history of cash flow generation is limited, particularly in light of large cash flow deficits experienced during the pandemic period.

The SGL-1 speculative grade liquidity rating reflects Moody’s expectation that Amex GBT will maintain very good liquidity over the next 12-15 months. Sources of liquidity consist of cash balances of $536 million as of December 31, 2024, expectation for annual free cash flow generation of at least $150 million, and full access to a new $360 million revolving credit facility due 2029.

The B1 rating on the senior secured bank credit facilities is in line with the company’s B1 CFR. The stable outlook reflects Moody’s view that the company will maintain organic revenue growth of 3%-5% and expand its EBITDA margin above 10% over the next 12-18 months. It also projects the company’s debt-to-EBITDA will decrease to around 4.0 times by 2026, while the company maintains very good liquidity.

The ratings could be upgraded if Amex GBT maintains organic revenue growth, improves EBITDA margins, sustains debt-to-EBITDA below 4.0 times, free cash flow-to-debt above 10%, while maintaining good liquidity. On the other hand, the ratings could be downgraded if industry challenges, competitive pressures or external shocks lead to lower than expected EBITDA growth, financial policies become aggressive or liquidity deteriorates.

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