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Pandemic drives Carlson family out of the business where they made a fortune

The family gave up its stake in Carlson Travel Co. and related businesses as part of a court-approved bankruptcy restructuring.

By Jeffrey Meitrodt

The pandemic has pushed the billionaire Carlson family, one of the wealthiest in Minnesota, out of the business where they made their fortune.

Carlson Travel Inc. and 37 related companies tumbled into bankruptcy last month after they were no longer able to withstand the worldwide collapse of corporate travel caused by efforts to slow the spread of coronavirus.

As the firms restructured $1.6 billion in debt, members of the founding family traded their ownership interest in the firms for debt forgiveness.

"The companies are now owned by a group of financial institutions and bondholders," Julian Walker, a Carlson Travel spokesman said. The family members "have no skin in the game."

The outcome is another major turning point for the Carlson family, now led by Marilyn Carlson Nelson and Barbara Carlson Gage, daughters of Curt Carlson, who started the Gold Bond Stamp Co. in 1938 and then the Carlson hotel and travel companies in the 1960s.

Carlson Cos., with its then-portfolio of 1,400 hotels, was sold in 2016 to the Chinese conglomerate HNA Tourism Group. With the exit now from the travel entities, the family's assets are chiefly in other investments.

The restructuring does not involve Carlson Private Capital Partners, the family's private equity firm in Minnetonka.

Carlson Travel will maintain its headquarters at the company's campus at the intersection of Interstate 394 and Interstate 494 in Minnetonka.

The company, which makes money by booking business trips and meeting and event planning, said in court filings that it does not expect its business to return to pre-pandemic levels in the next three years.

"Though the COVID-19 pandemic adversely affected many industries, few industries were as radically affected as the travel industry," Carlson Travel CEO Michelle Frymire said in an affidavit filed in bankruptcy court. "Corporate travel and in-person events and conferences came to an abrupt halt nearly overnight."

Carlson Travel expects to lose $15 million on revenue of $701 million next year, a substantial downturn from 2019, when Carlson Travel earned $239 million on $1.5 billion in revenue, court records show.

In the United States, business travel revenue in 2021 is projected to remain more than $59 billion below 2019 revenues, according to a recent report from the American Hotel & Lodging Association, a trade group. In 2020, business travel fell $49 billion. Hotels have shed nearly 500,000 jobs in the last two years, according to the trade group.

Minnesota has seen one of the steepest declines, with business travel revenue expected to be 72% lower this year than it was in 2019. Only eight other states will see bigger drops, with Massachusetts leading the way at 85%.

The primary business of Carlson Travel is CWT, formerly Carlson Wagonlit Travel, a global travel services company that employs more than 12,000 people in 45 countries. In 2019, CWT was a leader in corporate travel, booking thousands of business trips daily for government agencies, corporate giants and small- and mid-sized businesses around the world.

On an average day before COVID-19, CWT managed about 100 meetings and events, communicated to 70,000 travelers and facilitated more than 240,000 transactions, bankruptcy records show. The company processed more than $23 billion in hotel bookings, airplane flights, car rentals and other corporate travel expenses in 2019.

When the pandemic hit and travel collapsed, Carlson Travel executives sought to reorganize the company's finances, bankruptcy records show.

The company slashed costs through furloughs and pay cuts in 33 countries, saving $500 million. Altogether, the company temporarily eliminated about 5,000 jobs. It also renegotiated key contracts and leases, suspended capital-intensive projects and curtailed nearly all incentive compensation programs. Those changes permanently reduced operating costs by about $300 million a year, records show.

This May, the company hired investment banker Houlihan Lokey to contact 50 potential buyers and gauge their interest in buying some or all of Carlson Travel's assets.

Those talks ended after just one bidder emerged with an informal offer that failed to gain the support of Carlson's bondholders. In a liquidation analysis filed in court, Carlson Travel and its affiliates were valued at $1.1 billion, but creditors were unlikely to get back more than $202 million in a sale, records show.

The company also obtained $125 million in new equity from its owners and borrowed $260 million. Executives thought those moves would be enough. But then, as travel started to recover this year, COVID-19 cases rose again.

"In the United States, where recovery was initially perceived to be strong, the recent surge in the Delta variant and nationwide delays in 'return to office' initiatives injected significant uncertainty'' into the domestic travel recovery, Frymire said in the affidavit.

The company sought Chapter 11 protection last month with a prepackaged reorganization plan, one that had approval from owners and lenders. The plan will eliminate about half of the company's $1.6 billion in debt and provide $350 million in new equity capital. Carlson Travel plans to spend a portion of that on a new technology platform.

The company asked the court to approve the plan 18 hours after filing the case in Texas, noting that a delay of just a few days could mean the loss of customers and revenue.

However, the U.S. Trustee in Texas asked for a delay, saying the company's "breakneck schedule" made it impossible for creditors to evaluate and react to 38 bankruptcy cases.

Despite the protest, a Texas bankruptcy judge approved Carlson's plan the same day the trustee filed its complaint without commenting on the objection.

"We are pleased to have received prompt court approval of the agreement we reached with CWT's financial stakeholders, which positions the company for long-term success and provides significant financial resources to further grow and develop our business," Frymire said in a statement.

Carlson Travel asked the bankruptcy judge last week for permission to hire an investment banker to evaluate potential bids for the company. But that filing was made in order to pay the firm for an aborted sales effort earlier this year.

"We are not up for sale," Walker said.

about the writer

Jeffrey meitrodt.

Jeffrey Meitrodt is an investigative reporter for the Star Tribune who specializes in stories involving the collision of business and government regulation. 

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Carlson Family Gives Up Control of Namesake Agency CWT in Refinancing Deal

Matthew Parsons , Skift

September 15th, 2021 at 11:00 AM EDT

A new chapter that will help the agency focus on the future, but will an opaque ownership structure hinder its recovery plans?

Matthew Parsons

Corporate travel agency  CWT  hopes to draw a line under a tumultuous 18 months with a major financial restructuring, which will see the family-owned  Carlson  group switch from majority to minority stakeholder.

CWT, which up until 2019 was  known as Carlson Wagonlit Travel , has entered into an agreement with its equity owners, as well as firms that represent more than 90 percent of the company’s outstanding debt, to recapitalize the business.

Terms of the agreement, entered into with financial stakeholder  Barings , among others, include adding $350 million of new equity capital into the business, and eliminating almost $900 million of debt by replacing its existing $1.5 billion in debt with a new first lien debt of $625 million and an undrawn revolving credit facility. First lien debt holders are paid back before all other debt holders in the event of a default.

As a result of these manoeuvrings, the Carlson holdings ownership will be diluted, according to CWT CEO Michelle McKinney Frymire,  who replaced Kurt Ekert in May .

The refinancing, which is expected to complete by the end of the year, doesn’t involve any new parties coming to the table — which may come as a surprise after previous refinancing and other speculation. One industry source told Skift in September last year that  CWT would make an attractive acquisition target . “I see them being a net loser unfortunately, and there are others out there who might take an opportunistic approach and make a consolidation play,” they said at the time.

Rumors also circulated that private equity firm Certares, which this week  invested $354 million in an aerospace services firm , was looking at the company.

“All of the parties involved are existing investors, and they’re all really well regarded institutional investment managers,” said McKinney Frymire. “They understand the business, and have been incredibly supportive of the company and our strategy … CWT will remain an independent standalone company, we will have a number of debt holders who will become equity holders, many of whom already have some small portion of equity.”

McKinney Frymire also doesn’t envisage job cuts in the future. “Optimizing the operational footprint of the company, flattening the organization, we’ve done a lot of that work already,” she said.

CWT has been radically slimming down over the past few of years. In 2019 it axed several country director roles, and later transferred other regions into  cross-functional market management teams.

McKinney Frymire said there were currently 500 positions the company was looking to fill around the world.

Meanwhile, the restructure leaves CWT with a generous $400 million of available liquidity on the balance sheet. It claimed this is the largest amount among its peers, but the money won’t be directed towards acquisitions,  which has been a major trend  during the pandemic.

“We’re focused on our people and technology,” McKinney Frymire said. “That’s not to say we wouldn’t take advantage if we thought there was an opportunity that made sense. But it’s not an intentional focal point.”

Beyond the Pandemic

Now the calculations have been made, McKinney Frymire said she wants to put the business in a position to take advantage of the recovery in business travel. She’s been out talking to her biggest customers, where the news was “universally and very positively received.”

Yet it marks a significantly different chapter with its former namesake taking a back seat. Carlson was founded in 1938 in the U.S. state of Minnesota by Curt Carlson, with Carlson Wagonlit Travel formed in 1994 following its partnership with France’s Wagonlit Travel, which was owned by Accor.  Accor sold its share in the company in 2006.

But CWT is keen to point out that its rebrand in 2019 meant the company was no longer called Carlson Wagonlit Travel, despite the initials. Now, Carlson will retain some stake, but the exact percentage is still to be determined.

“Having over 90 percent of the debt holders in this agreement is really remarkable, and demonstrates the support our financial stakeholders have for the business,” McKinney Frymire added.

That show of support for the ailing travel agency also demonstrates a certain level of faith in the corporate travel sector’s potential to rebound. So much so, they’re literally banking on it.

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Favoring Foes Over Friends, Trump Threatens to Upend International Order

Former President Donald J. Trump suggested that he would incite Russia to attack “delinquent” U.S. allies, foreshadowing potentially far-reaching changes in the world order if he wins the White House again.

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By Peter Baker

Peter Baker has covered the White House under five presidents and reported from Moscow for four years.

Soon after former President Donald J. Trump took office, his staff explained how NATO’s mutual defense obligations worked.

“You mean, if Russia attacked Lithuania, we would go to war with Russia?” he responded. “That’s crazy.”

Mr. Trump has never believed in the fundamental one-for-all-and-all-for-one concept of the Atlantic alliance. Indeed, he spent much of his four-year presidency undermining it while strong-arming members into keeping their commitments to spend more on their own militaries with the threat that he would not come to their aid otherwise.

But he took it to a whole new level over the weekend, declaring at a rally in South Carolina that not only would he not defend European countries he deemed to be in arrears from an attack by Russia, but that he would go so far as to “encourage” Russia “to do whatever the hell they want” against them. Never before has a president of the United States — even a former one aspiring to reclaim the office — suggested that he would incite an enemy to attack American allies.

Some may discount that as typical Trump rally bluster or write it off as a poor attempt at humor. Others may even cheer the hard line against supposedly deadbeat allies who in this view have taken advantage of American friendship for too long. But Mr. Trump’s rhetoric foreshadows potentially far-reaching changes in the international order if he wins the White House again in November with unpredictable consequences.

What’s more, Mr. Trump’s riff once again raised uncomfortable questions about his taste in friends. Encouraging Russia to attack NATO allies, even if he were not fully serious, is a stunning statement that highlights his odd affinity for President Vladimir V. Putin, who has already proved his willingness to invade neighboring countries that do not have the protection of NATO.

Long averse to alliances of any kind, Mr. Trump in a second term could effectively end the security umbrella that has guarded friends in Europe, Asia, Latin America and the Middle East for much of the nearly eight decades since the end of World War II. Just the suggestion that the United States could not be depended on would negate the value of such alliances, prompt longtime friends to hedge and perhaps align with other powers, and embolden the likes of Mr. Putin and Xi Jinping of China.

“Russia and China have nothing to compare with America’s allies, and these allies depend on American commitment,” said Douglas E. Lute, a retired lieutenant general who served as ambassador to NATO under President Barack Obama and top adviser to President George W. Bush on the wars in Afghanistan and Iraq. “Casting doubt on the United States’ commitment to its allies sacrifices America’s greatest advantage over Russia and China, something that neither Putin nor Xi could achieve on his own.”

Undeterred by criticism of his latest comment, Mr. Trump doubled down on Sunday.

“No money in the form of foreign aid should be given to any country unless it is done as a loan, not just a giveaway,” he wrote on social media in all capital letters. “We should never give money anymore,” he added, “without the hope of a payback, or without ‘strings’ attached.”

Mr. Trump has long threatened to withdraw the United States from NATO and would no longer be surrounded by the kind of advisers who stopped him from doing so last time. He tried to pull American troops out of Germany at the end of his presidency in anger at Angela Merkel, then the chancellor, a withdrawal that was prevented only because President Biden came to office in time to rescind the decision.

At other points, Mr. Trump contemplated pulling American troops out of South Korea as well, only to be talked out of it, but has said since leaving office that such a move would be a priority in a second term unless South Korea paid more in compensation. Mr. Trump would also probably cut off military aid to Ukraine as it seeks to fend off Russian invaders, and he has offered no support for more aid to Israel in its war with Hamas.

Foreseeing the possibility of an American retreat from the world if Mr. Trump returns to office, Congress recently passed legislation barring any president from withdrawing from the NATO treaty without Senate approval. But Mr. Trump would not even need to formally quit the alliance to render it pointless.

And if the United States could not be counted on to come to the aid of partners in Europe, where it has the strongest historic ties, then other countries with mutual security agreements with Washington like Japan, the Philippines, Thailand, Australia, Argentina, Brazil, Chile, Colombia, Costa Rica and Panama could hardly be sure of American help, either.

Peter D. Feaver, a Duke University professor and former national security aide to Mr. Bush and President Bill Clinton, said Mr. Trump could reduce American troops in Europe to a level that “would render any military defense plans hollow” and “regularly poor-mouth the U.S. commitment” in a way that would convince Mr. Putin that he had free rein.

“Just doing those two things could wound and perhaps kill NATO,” Mr. Feaver said. “And few allies or partners in other parts of the world would trust any U.S. commitment after seeing us break NATO.”

History suggests this could result in more war, not less. When Dean Acheson, the secretary of state, described an American “defensive perimeter” in Asia in 1950 that did not include South Korea, North Korea invaded five months later, starting a bloody war that nonetheless pulled in the United States.

The signal from Mr. Trump to NATO allies like Poland, Finland, Estonia, Latvia and, yes, Lithuania is that they could be on their own by next January. Coming just days after Mr. Putin told Tucker Carlson that Poland was at fault for Adolf Hitler invading it in 1939 , the mood in Warsaw could hardly be more unsettled.

“Article 5 has so far been invoked once — to help the U.S. in Afghanistan after 9/11,” Radek Sikorski, the foreign minister of Poland, noted in an email exchange on Sunday. “Poland sent a brigade for a decade. We did not send a bill to Washington.”

Jason Miller, a spokesman for Mr. Trump, pushed back against critics on Sunday, saying that Europe had seen more war under Mr. Biden than it did under the former president.

“President Trump got our allies to increase their NATO spending by demanding they pay up, but Joe Biden went back to letting them take advantage of the American taxpayer,” he said. “When you don’t pay your defense spending, you can’t be surprised that you get more war.”

The scorn for NATO that Mr. Trump expresses is based on a false premise that he has repeated for years even after being corrected, a sign that he is either incapable of processing information that conflicts with an idée fixe in his head or willing to distort facts to suit his preferred narrative.

As he has many times, Mr. Trump on Saturday castigated NATO partners that he called “delinquent” in paying for American protection. “You’ve got to pay,” he said. “You got to pay your bills.”

What Mr. Trump is referring to misleadingly is a nonbinding goal set by NATO defense ministers in 2006 that each member spend 2 percent of its gross domestic product on its own military, a standard ratified by NATO leaders in 2014 with the aspiration of achieving it by 2024. As of last year, just 11 of the 31 members , including Poland and Lithuania, had achieved that level, one more than under Mr. Trump. Last summer, NATO leaders pledged an “enduring commitment” to finally reaching the target. But even those who have not followed through do not actually owe money to the United States as a result.

NATO military spending is a legitimate concern, according to national security veterans, and Mr. Trump is not the first president to press NATO partners to do more — Mr. Bush and Mr. Obama did as well. But Mr. Trump is the first to present the alliance as a sort of protection racket where those who do not “pay up” will be abandoned by the United States, much less subject to attack by Russia with Washington’s encouragement.

“The credibility of NATO rests on the credibility of the man that occupies the Oval Office, since it’s the decisions taken there that in a critical situation will be decisive,” said Carl Bildt, a former prime minister of Sweden, which is completing its accession to NATO as the 32nd member.

“This applies to what could be crisis management in a minor engagement of some sort to the ultimate issue of the nuclear deterrent,” he said. “If Putin threatened nuclear strikes against Poland, would Trump say that he doesn’t care?”

Mr. Trump’s fixation on being paid by allies extends beyond Europe. At one point he assailed the mutual defense treaty with Japan that has been in force since 1951, and at other points he prepared to order U.S. troops out of South Korea. During an interview in 2021 shortly after leaving office, he made clear that if he returned to power, he would demand that South Korea pay billions of dollars more each year to keep American troops there.

National security veterans of both parties said that kind of thinking misunderstood the value of the alliances for the United States. It is a benefit to Americans, they say, to have overseas bases in places like Germany and South Korea that enable quick responses to crises around the world. It also deters adventurism by outcast states like North Korea.

“America’s commitment to its allies is not altruism or charity, but serves a vital national interest,” Mr. Lute said.

The uncertainty that would result from Mr. Trump’s lack of commitment, according to national security specialists, would lead to volatility unseen in years.

“The only saving grace,” Mr. Bildt said, “is that he will probably be so unreliable and unpredictable that even the Kremlin would be somewhat uncertain. But they would know that they have a fair chance of playing him politically in any crisis.”

Peter Baker is the chief White House correspondent for The Times. He has covered the last five presidents and sometimes writes analytical pieces that place presidents and their administrations in a larger context and historical framework. More about Peter Baker

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Putin has decided that Russia is going to be a 'safe haven' for people who want to trade liberal Western ways for Russian 'moral values'

• Putin signed a decree that Russia would welcome foreigners wanting to escape Western liberal ideals.
• Applicants may include those from countries unaligned with "Russian spiritual and moral values."
• The application process has been simplified, and visas may be issued as soon as next month.

Russia, in many ways an authoritarian state, has designated itself as a "safe haven" for citizens of Western countries looking to escape "destructive neoliberal ideas."

Russian President Vladimir Putin signed a decree that Moscow would assist any foreign nationals wanting to apply for temporary residence in Russia "outside the quota approved by the Russian government and without providing documents confirming their knowledge of the Russian language, Russian history, and basic laws," Russian state media reported Monday.

People interested in temporary residency may apply for visas through a simplified and expedited process. Russia is expected to begin issuing three-month visas as early as next month.

Applicants can request residency based on the rejection of what the decree describes as their home countries' "destructive neoliberal ideals," which it says differ from "traditional Russian spiritual and moral values." Russia is expected to produce a list of which countries are included in this exception, TASS said in its report on the new decree.

Some far-right figures and conspiracy theorists celebrated news of the new policy in a manner that aligns with a growing online trend, particularly among certain far-right personalities, of praising Russian society and comparing it positively with the US and other Western nations.

Praise for Russia has been a common occurrence among some prominent figures on the right, including former President Donald Trump, who has often spoken positively about Putin. Others have parroted Russian talking points, while others have celebrated some elements of Russian society.

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In February, after giving the Russian leader a platform to spread misinformation about the war in Ukraine, the former Fox News personality Tucker Carlson went on to praise aspects of Russian society , calling it "shocking" and "disturbing" how much "nicer" Moscow was than any city in the US. He said his position was still pro-America, though.

Others influential in the online space have also shown varying degrees of admiration for Russian society as Putin tries to condemn Western ideals and to present Russia as a place where, as Russian state media said, "traditional values reign supreme."

Rhetoric of this nature has shown up in the Russian leader's speeches. In 2022, Putin criticized the West as "satanic," arguing that it had rejected "moral norms" and "traditional" values. And in his Victory Day speech in 2023, he attacked "Western globalist elites" for what he said was the destruction of "family and traditional values ​​that make a person human."

Russia's new visa policies appear rooted in this kind of thinking.

Watch: Drone footage shows thousands of Russians fleeing Putin's draft to fight in Ukraine

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