UPDATE2 (Mon 26 Sept):
Travelport appears to be playing the public negotiating card. In a statement today, Travelport Ltd says the "majority" of PIK holders have consented to amendments proposed last week.
But unanimous approval is required to amend the debt arrangements, including extending the maturity date until 2016.
This process is still "ongoing", Travelport says.
UPDATE (Fri 23 Sept): Travelport Holdings, the parent company of Travelport (Travelport Ltd), has moved to extend the terms of its PIK loan to 2016, but there is a possibility that Travelport Holdings could go into bankruptcy to force the move through.
There needs to be unanimous consent by all the parties owning the PIK (see details below) to make the move possible, but if absolute agreement is not reached then Travelport Holdings could begin voluntary bankruptcy procedures (Chapter 11 in the US) to complete the transaction.
The mechanism would have no material impact on operations at the Travelport Ltd level, with distribution arrangements and technology not affected, but would clearly be another awkward milestone in the ongoing efforts by Travelport to put its financial position on a steadier footing.
In a filing to the SEC in the US yesterday, Travelport reported its share of GDS-processed segments had declined from 33% in 2007 to 28% in 2010.
The fall is blamed on losing the big Expedia account with Worldspan (shortly before its acquisition by Travelport) and also a strategic move to switch from using third party distributors to bringing operations in-house.
"This decline can be primarily attributed to the loss of Worldspan’s business with Expedia Inc, a decision that Expedia made prior to the Worldspan acquisition but which impacted Travelport after the Worldspan acquisition, and Travelport’s decision to establish direct sales and marketing operations in the United Arab Emirates, Saudi Arabia and Egypt, leading to a loss in volume as a result of transitioning from relying on third party national distribution companies (“NDCs”) in these countries."
Unanimous approval for the new terms of the PIK loan, or a move into Chapter 11, could take place as early as next week.
ORIGINAL STORY:
Travelport Holdings (parent of Travelport Ltd) will have until 2016 to repay its payment in kind (PIK) loan after reaching an agreement in principle to extend the loan.
The move follows talks between Travelport Holdings with lenders holding the majority of the unsecured PIK (around $715 million), originally due for repayment at the end of March 2012.
Travelport has proposed a number of options to lenders:
- An $85 million pro-rata cash repayment.
- Exchange of $207.5 million of current PIK loads for equal value on second term loads, due to December 1 2016.
- Extension of remaining PIK loans in two stages ($287.5 million by 2016 and $135 million by September 30 2012).
- Equity in parent of Travelport Holdings (an asset of Blackstone).
Extending the lifetime of the PIK may go some way to appeasing the large credit rating agencies that have downgraded Travelport in recent weeks.
Moody's was the first to come out in early-August, citing concerns over the PIK repayment schedule, followed by Standard & Poor's last week.
President and CEO Gordon Wilson says:
"We continue to be committed to expanding and improving our product and technical platform and building on our position as one of the world's leading travel content aggregators and transaction processing providers."