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S&P lowers Orbitz loan to B+
Standard & Poor's said it affirmed Orbitz Worldwide Inc.'s B corporate credit rating and lowered its $685 million secured credit facility to B+ with a recovery rating of 2 from BB- with a recovery rating of 1.
The ratings were removed from CreditWatch, where they were placed with negative implications on May 22. The outlook is now negative.
The CreditWatch listing had followed the company's launch of an amendment to its credit agreement that would allow it to make non-pro rata market purchases of this debt. S&P was concerned that this transaction could qualify as a distressed debt purchase and had concerns about the effect of the reduced level of travel demand and the elimination of certain booking fees on the company's revenues and earnings.
S&P said its review concluded that, at the current rating level, the company's financial profile could withstand a limited amount of revenue erosion that, in large part, has been mitigated by substantial cost reductions. The agency also concluded that the company's $10 million buyback of its term loan was not a distressed debt purchase under S&P's criteria.
The lower ratings on the term loan are based on the agency's expectations of lower EBITDA at the time of default and a lower enterprise multiple, reflecting lower revenues due to the current economic environment and elimination of the booking fees. Consequently, enterprise value at the time of emergence is lower and results in a lower recovery.
The negative outlook reflects S&P's concerns regarding potential liquidity pressures due to the company's weak operating performance, the need to cash collateralize its letter-of-credit facility or adverse legal judgments, the agency said.
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