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Rating Action:

Moody's places Travelport's CFR on review for upgrade

04 Aug 2014

Assigns (P)B3 rating to Travelport Finance Luxembourg's first-lien loan facilities

London, 04 August 2014 -- Moody's Investors service has today placed Travelport LLC's Caa1 corporate family rating (CFR) and Caa1-PD probability of default rating (PDR) under review for upgrade. At the same time, Moody's has assigned provisional (P)B3 ratings to the proposed USD2.3 billion first-lien loan facility and USD100 million revolving credit facility (RCF) to be issued by Travelport Finance (Luxembourg) S.a.r.l. Moody's has also placed the (P)B3 ratings under review for upgrade.

"Upon the successful closing of the transaction we expect to move the CFR from Travelport LLC to Travelport Limited which is the top entity of the new restricted group", said Knut Slatten, Moody's Assistant Vice President and Lead Analyst for Travelport. The refinancing is expected to enhance Travelport's free cash flows as interest expenses diminish significantly. Moreover, Travelport has in recent months de-leveraged its capital structure. "As a result we expect to upgrade the CFR and PDR to B3 upon transaction closing as currently presented. We also expect to withdraw all existing ratings at Travelport LLC", adds Mr.Slatten. Following the refinancing, Moody's understands Travelport's capital structure will essentially consist of the USD2.3 billion first-lien loan and USD500 million of unsecured notes. Should the ultimate capital structure of Travelport be along these lines, Moody's would expect to upgrade the ratings of the USD2.3 billion first-lien facility and USD100 million RCF to B2 driven by the high amount of junior debt ranking behind it in the waterfall.

Moody's issues provisional ratings in advance of the final sale of securities and these ratings reflect Moody's preliminary credit opinion regarding the transaction only. Upon conclusive review of the final documentation, Moody's will endeavour to assign a definitive rating to the first-lien loan facility. A definitive rating may differ from a provisional rating.

RATINGS RATIONALE

On 1 August, Travelport announced it would embark upon an extensive refinancing which will see all of its existing financial debt refinanced through the issuance of USD2.3 billion of first-lien loans and USD500 million of unsecured notes. The envisaged refinancing will strengthen Travelport's credit profile as free cash flows are projected to significantly increase as the company's annual interest expenses diminish considerably. The liquidity profile will further strengthen as Travelport will have no upcoming debt-maturities in the foreseeable future. Following the refinancing, Moody's would also no longer expect the company's liquidity profile to be dented by limited headroom to financial maintenance covenants.

In recent months Travelport has taken several measures in order to de-leverage its capital structure. Among others, the company has divested its stake in Orbitz Worldwide, Inc -- an asset Travelport earlier in the year had classified as being a non-core asset -- and have already applied these funds towards debt redemption in advance of the refinancing transaction. At closing of the transaction, Moody's would expect the company's leverage -- defined as Moody's adjusted debt/EBITDA -- to remain high at around 6.5x. Moody's anticipates only limited de-leveraging to take place until the end of FY2015 as Travelport during 2015 will face headwinds following its revised distribution-agreement with Orbitz. As a result, Travelport has guided towards its 2015 EBITDA being broadly flat against 2014.

Whilst not incorporated into the ratings at this stage, Moody's acknowledges, however, that Travelport Worldwide (the parent company of Travelport LLC), in the beginning of June announced it had filed a registration statement with the SEC related to a proposed initial public offering (IPO) of its common shares. A successful IPO could further contribute to de-leveraging and upward pressure on the ratings, depending on the amount raised in the offering.

The (P)B3 rating assigned to the first-lien instrument reflects its preferential positioning in the waterfall. Moody's understands the first-lien loan facility to be secured upon assets and benefit from upstream guarantees from its operating subsidiaries.

Following the refinancing, Moody's expects that Travelport's liquidity profile will be adequate over the next 12-18 months. Pro-forma for the transaction, Moody's understands Travelport will have unrestricted cash balances of around USD163 million and expects that Travelport will generate positive free cash flows. Further liquidity cushion is provided by access to an undrawn RCF of USD100 million. Moody's would expect the company to have ample leeway to financial maintenance covenants, which will only be tested if the RCF is drawn by 30% or more.

PRINCIPAL METHODOLOGIES

The principal methodology used in these ratings was the Global Business & Consumer Service Industry Rating Methodology published in October 2010. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

Headquartered in Atlanta, Georgia, Travelport is a leading provider of transaction processing services to the travel industry through its global distribution system (GDS) business, which includes the group's airline information technology solutions business. During FY2013, the group reported revenues and adjusted EBITDA of USD2.1 billion and USD517 million, respectively.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Knut Magne Slatten
Asst Vice President - Analyst
Corporate Finance Group
Moody's France SAS
96 Boulevard Haussmann
Paris 75008
France
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Eric de Bodard
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Releasing Office:
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JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's places Travelport's CFR on review for upgrade
No Related Data.
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