May 22, 2009

These days, a good night's sleep can be hard to come by for a CFO in a precarious industry like the hotel and time-share business. Banks and investors are well aware of the fragility of travel-and-vacation revenues in the current downturn, and capital doesn't come cheap. Some finance chiefs might feel that the expense of stashing away enough cash to ensure their companies' survival if their worst-case scenarios come true is too high right now. Not Vasant Prabhu, CFO for Starwood Hotels & Resorts Worldwide, however.

Lately, Prabhu has been busy negotiating a looser leverage covenant on Starwood's revolving credit line and leading the way as his company pounced on a big bond offering just before issuing its quarterly earnings call. Both moves came at a high cost. But the finance chief believes it was worth it, because, as matters stand now, things would have to get pretty disastrous for the company to run out of cash.On April 27, Starwood announced that it had increased the maximum debt-to-EBITDA ratio in its revolving loan covenant from 4.5 times to 5.5 times without having to cut the size of the loan.