Influential credit agency Moody's has lowered the corporate family rating (CFR) and probability of default rating (PDR) for travel technology giant Travelport.
Moody's says its outlook for the business remains "negative" after downgrading the CFR and PDR to CAA1 from B3, defined as from "subject to high credit risk" to "poor standing and are subject to very high credit risk" [full explanation of terms].
"The senior secured, senior unsecured and the subordinated instrument ratings have also been lowered to B1 from Ba3, to Caa2 from Caa1, and to Caa3 from Caa2, respectively," Moody's says in a note to investors issued yesterday.
Moody's new position comes after what it calls "further weakening of operating results" at Travelport published two weeks ago, but also the larger issue of the Travelport's debt to its holding company, essentially private equity powerhouse Blackstone.
The so-called Payment In Kind (PIK) loan is to the tune of around $700 million and is due at the end of March 2012.
Travelport, which will not comment on the PIK, nor Blackstone have yet to announce a strategy for how the debt issue will be resolved, prompting the latest concerns at Moody's, one of the three large rating agencies in the world alongside Standard & Poor's and Fitch.
The investor note says:
"Moody's believes that the pending maturity of the PIK notes at Travelport Holdings Ltd in March 2012 poses a degree of risk for the financial profile of Travelport LLC if they are not entirely refinanced at the holding company level."
Although the clock is ticking ahead of March 2012, Travelport will not comment other than to say it is "business-as-usual".
An official adds:
"Our credit rating goes up and down all the time, similar to other companies. Rating changes have no impact on our business operations, financial condition and contracts."