Investing.com -- Moody’s Ratings has confirmed the B3 Corporate Family Rating (CFR) and B3-PD Probability of Default Rating (PDR) for Sabre (NASDAQ: SABR ) Holdings Corporation, along with the B3 ratings on Sabre GLBL Inc.’s senior secured notes and bank credit facilities, and the B2 rating on Sabre Financial Borrower, LLC’s senior secured term loan. The outlook for all three issuers has been revised to stable from negative, and Sabre’s Speculative Grade Liquidity Rating (SGL) remains at SGL-2.

This rating action comes in response to Sabre’s definitive agreement to sell its hospitality segment to TPG Capital for around $1.1 billion. The company’s board has approved the transaction, which is expected to conclude by the end of Q3 2025, pending customary closing conditions and regulatory approvals. The deal is not contingent on any financing conditions. The sale is viewed as credit positive, as the hospitality segment is being sold at a high multiple of reported earnings. Sabre plans to use the majority of the sale proceeds, approximately $960 million net of transaction fees and expenses, to repay debt.

Following the transaction, Moody’s estimates that leverage could decrease by approximately .7x, based on 2024 segment reporting. The sale will reduce Moody’s adjusted revenue and EBITDA by approximately 11% and 9%, respectively. Additionally, Moody’s expects 3%-4% revenue growth in the remaining distribution business and significant growth in EBITDA and free cash flows in 2025, driven by cost savings and growth initiatives.

Despite high leverage, weak profitability, and break-even free cash flow, Sabre maintains a strong market position as the second-largest provider of Global Distribution System (GDS) services globally. The company’s earnings and margins are expanding due to a more favorable and efficient cost structure and revenue growth supported by sustained demand for travel. Coupled with a conservative financial policy that targets 2.5x to 3.0x net leverage, and the company’s growing capacity to significantly reduce debt, leverage could decline substantially over the next 12-18 months.

The stable outlook reflects Moody’s expectation for significant deleveraging over the next 12 to 18 months, driven primarily by mandatory debt repayments and earnings growth. Moody’s also expects low single-digit revenue growth and significant margin improvement, supported by a more efficient cost structure which should produce up to $200 million in free cash flow in 2025.

Sabre’s liquidity is good, supported by a large cash balance of approximately $724 million at the end of the last quarter, which is more than sufficient to cover all basic obligations over the next 12 months, including 2025 debt maturities. The company does not maintain revolving credit facilities but does have access to two securitization facilities totaling $235 million in commitments, which are largely utilized.

According to Moody’s, the ratings could be upgraded if leverage is sustained below 5.5x and free cash flow to debt is sustained in the mid-single-digit percent range. A downgrade could occur if leverage does not materially improve over the next 12 to 18 months, liquidity declines, near-term debt maturities are not successfully refinanced well in advance, or if operating performance deviates from management’s plan.

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