Our thoughts on the Booking.com supply sell-off

Booking.com looks like it will price its 4-part tight to secondary (on the 5 & 8yr) - initial colour on books do look lower than other deals & the 7-11bp sell-off in secondary does point to dealers caught long & leaves the curve screening even cheaper to us.

The 26's are now spread at ~8bps for the 6-month term extension to higher beta Ryanair (NR BBB+), trading in line with Aussie Toll operator, Transurban's curve (TCLAU Baa1/BBB+) (the $ curve is spread +50bps), trades ~on par with FedEx (Baa2, BBB) & spread 8bps on 27's to 2-notch lower & close comp Travel software name Amadeus (Baa2, BBB). We are not sure why market has struggled to price BKNG with equally rated peers - perhaps trauma from Covid - even though it has had no rating changes in recent yrs.

Though it restarted dividends last week, it has headroom on leverage targets that have been affirmed by S&P & left unch by company - also of note pace of buybacks will be ~slower than FY23 ($10b) - $14b in authorisation left that it will use up by '26, nothing new from mgmt in roadshow deck. Supporting returns are analyst forecasts for strong earnings & FCF growth to FY25. Front maturity/only debt due this yr is the €1b Sept 24's (€99.1) - does have relatively heavy '25 maturities (~$2.4b).

Though we did not anticipate supply (neither did the market) our view that the name is cheap is unch. Particularly on spreads decompressing, we think it has room to outperform.