Moody’s Investors Service has elevated Oravel Stays Limited's corporate family rating (CFR), the parent entity of travel tech platform Oyo, from B3 to B2. The upgrade also applies to the senior secured term loan issued by its subsidiary, Oyo Singapore. The outlook for the company remains stable, reflecting confidence in its financial trajectory.  

 New Loan Assignment  

A B2 rating has been assigned to an $825 million senior secured term loan facility planned by Oravel Stays Singapore Pte. Ltd. The facility, fully underwritten by Deutsche Bank, is set to bolster the company’s financial standing and reduce refinancing concerns.  

 Refinancing Strategy  

Oyo is currently working to secure a five-year $825 million term loan. This loan, combined with $174 million in equity raised between June and August 2024, will be allocated to repaying its existing Term Loan B (TLB) maturing in June 2026. This approach aims to mitigate refinancing pressures, a significant step toward financial stability.  

 Strategic Acquisition Plans  

Part of the loan proceeds will support Oyo’s proposed $525 million acquisition of Motel 6, a US-based hotel chain. This acquisition is expected to expand the company's operational scale and diversify its geographical presence, particularly in developed markets, strengthening its overall business profile.  

 Decline in Interest Expenses  

With the partial repayment of its TLB last year, Oyo's interest expenses are projected to decrease significantly. The company’s annual interest payments are expected to drop to $65-$70 million in FY24-25, compared to $101 million in the previous fiscal year, improving its financial efficiency.  

 Free Cash Flow Prospects  

Moody’s anticipates that Oyo will turn free cash flow positive on a full-year basis by FY25-26. This marks a significant turnaround for the company, which has faced substantial cash burn in recent years. The combination of ongoing earnings growth and reduced interest expenses underpins this positive outlook.  

 Earnings and Growth Forecast  

Oyo’s EBITDA is expected to reach $200 million in FY25-26, benefiting from contributions by newly acquired businesses. Moody’s emphasized that these acquisitions would enhance Oyo’s operational scale and financial resilience, particularly through diversification and exposure to developed markets.  

 Stable Outlook 
  
According to Sweta Patodia, Assistant Vice President and Analyst at Moody’s, the upgrade reflects the reduced refinancing risks associated with the proposed long-term loan. The stable outlook indicates that Oyo is expected to maintain steady earnings and cash flows over the next one to two years, supporting its credit rating.  

By focusing on refinancing efforts, strategic acquisitions, and cost efficiency, Oyo is poised to strengthen its financial position and expand its global footprint.