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Rating Action:

Moody's lowers Travelport's CFR to B3; outlook remains negative

17 Mar 2011

Approximately USD3.8 billion in rated debt instruments affected

London, 17 March 2011 -- Moody's has today lowered the corporate family rating (CFR) and probability of default rating (PDR) of Travelport LLC (Travelport) to B3 from B2. The senior unsecured and the subordinated instrument ratings have also been lowered to Caa1 from B3, and to Caa2 from Caa1, respectively. The senior secured ratings are affirmed at Ba3. The outlook remains negative.

RATINGS RATIONALE

The rating action reflects Moody's view that the company's metrics at the end of FY2010 and in the foreseeable future will no longer be commensurate with the guidance previously given for the B2 rating category, notably for gross leverage, adjusted for the PIK notes, to trend towards 6.5x. At the same time, Moody's recognizes that the agreed sale of the GTA business for USD720 million, will reduce the company's pro forma net debt as of September 2010 to USD2.76 billion, and provide some extra headroom under its bank covenants in the short-term. The sale represents an approximately 8.5x multiple of GTA's 2010 reported EBITDA of USD84 million. However, the company estimates its 2010 adjusted EBITDA, as reported and excluding GTA, at USD545 million. On this basis, we estimate that gross leverage, as adjusted by Moody's and pro forma for the sale, will be approximately 7.2x at FYE2010.

The negative outlook reflects our view that in spite of the recent growth in passenger numbers, the benefit for Travelport will continue to be mitigated by pressure on margins in 2011. In addition, we note the step-up in the maximum leverage covenant to 5.5x in the fourth quarter of 2011 from 5.75x currently, such that headroom under the covenant is expected to remain tight during the year. Finally, we note the near-term maturity of the PIK notes issued at Travelport Holding Ltd., maturing in March 2012, for which we expect that the company will need to seek refinancing. While we understand that there is no cross-default between the PIK notes and debt instruments at the rated entity, we believe that there may be circumstances (by virtue of change of control provisions or otherwise) in which a default on the PIK notes could negatively impact the debt-holders at Travelport.

The proceeds from the sale of GTA will be used towards repayment of the bank facilities. As a result of this decline in bank debt, the affirmation of the senior secured facilities at Ba3 (LGD2) reflects their smaller share of total debt and seniority to other debt within the capital structure. The Caa1 (LGD4) senior unsecured and the Caa2 (LGD5) subordinate ratings reflect their ranking relative to other debt in the capital structure.

In view of the negative outlook, no material upward pressure is currently contemplated. For the outlook to be stabilized, we would expect gross leverage, adjusted for the PIK notes, to remain below 7x, with sufficient headroom under the banking covenants. This could also result from a further equity contribution from the private equity owners. The rating could be downgraded if earnings were to deteriorate further during the year, or if concerns were to develop about liquidity. This could be the result of a lack of headroom under the bank covenants, or if the refinancing of the PIK notes were to negatively impact the debt-holders at Travelport.

The principal methodology used in rating Travelport was Moody's Global Business and Consumer Service Industry, published in August 2007. The last rating action for Travelport LLC was on 10 October 2010, when all ratings were affirmed and the outlook was changed to negative from stable.

Headquartered in New-York, Travelport is a leading provider of transaction processing services to the travel industry through its two main business networks, the global distribution system ("GDS") business, which includes the Group's airline information technology solutions business, and the Gullivers Travel Associates ("GTA") business. During fiscal year ending December 2010, the company generated revenues and EBITDA of USD2 billion and USD545 million, respectively, on a pro forma basis for the divestment of its GTA business in May 2011.

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Information sources used to prepare the credit rating are the following: parties involved in the ratings, public information, and confidential and proprietary Moody's Investors Service information.

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Please see ratings tab on the issuer/entity page on Moodys.com for the last rating action and the rating history.

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London
Richard Morawetz
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

London
Paloma San Valentin
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

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Moody's lowers Travelport's CFR to B3; outlook remains negative
No Related Data.
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