Orbitz: equity investments boost ability to meet financial covenants

By Jennifer Lanning Drey

Portland, Ore., Nov. 5 - Orbitz Worldwide Inc. expects to be in compliance with all of its financial covenants going forward, based on equity investments announced Thursday totaling $100 million, Marsha Williams, chief financial officer of Orbitz, said during the company's third-quarter earnings conference call, also held Thursday.

Specifically, Orbitz announced PAR Investment Partners will exchange $49.68 million of senior term debt for 8.16 million shares of Orbitz' common stock, while Blackstone-controlled Travelport will purchase 9.025 million shares of newly issued Orbitz common stock for $5.54 per share.

Williams said the transactions would allow Orbitz to delever and provide the company with additional financial flexibility.

Orbitz was in compliance with all of the financial covenants in its credit agreement at the end of the third quarter and had cash and cash equivalents of $122 million.

During the call, Williams also said the company expects to repay its revolving credit facility early next year, as it no longer sees a need to keep the debt outstanding since the banking industry has recovered from prior periods.

In the third quarter, Orbitz generated $5 million of operating cash flow, down from $12 million of operating cash flow generated in the same period in 2008. The decline was caused by lower merchant hotel gross bookings due to lower global hotel room rates, as well as faster payment terms for a key vendor.

Orbitz continued to focus on reducing its operating expenses in the third quarter, which was a key contributor to it posting adjusted EBITDA of $44 million for the period, Williams said. The figure represented a 2% increase over the comparable period in 2008.

Third-quarter net revenue was $187 million, down 22% from the same period last year. The company said the decline was primarily due to the removal of most air booking fees and the significant reduction of hotel booking fees on its domestic web sites, as well as a decline in average hotel room rates.

"We're very pleased with our new equity raise and our third-quarter results. For the balance of 2009 and 2010, we're continuing to focus on competing in the global hotel business through the execution of our key initiatives," Williams said.

Orbitz is a Chicago-based online travel company.

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