Travelport launches amendment to restructure PIK debt, extend revolver

By Sara Rosenberg

New York, Sept. 19 - Travelport Ltd. held a lender call at 11 a.m. ET on Monday to launch an amendment to its senior secured credit facility that would allow the company to deal with its upcoming unsecured payment-in-kind term loan maturity through a restructuring, according to a market source.

The company would also like to extend its revolver to April 28, 2014 from Aug. 23, 2012 and would voluntarily reduce commitments by 20%, subject to a minimum extension of 50% of the facility. Pricing on the extended revolver would increase by 175 basis points to Libor plus 450 bps and the commitment fee would increase to 75 bps from 50 bps.

Regarding the restructuring, Travelport Holdings Ltd., the holder of the PIK loan due March 27, 2012, has reached an agreement in principle with a majority of its lenders on the proposal, but in order to get done, unanimous approval is required.

Under the terms outlined in the solicitation documents, holders of the roughly $715 million PIK loan are being offered an $85 million pro-rata cash repayment, an exchange of $207.5 million of existing PIK debt for $207.5 million of second-lien term loans due Dec. 1, 2016, and equity of the parent company equal to 15%, which may increase over time to a maximum of 44% if the PIK loans are not repaid or a refinancing transaction has not been announced.

As for the remaining debt, the company would extend $287.5 million of the PIK debt to Dec. 1, 2016 at pricing of Libor plus 1,350 bps PIK and $135 million of the loan to Sept. 30, 2012 at pricing of Libor plus 600 bps PIK. The tranche due on Sept. 30, 2012 would be guaranteed by a $135 million second-lien term loan due Dec. 1, 2016.

The entire new second-lien loan ($342.5 million) would be priced at Libor plus 600 bps PIK toggle, but if first-lien leverage is above or equal to 3.0 times, cash interest cannot be paid.

Travelport's credit facility amendment would permit the incurrence of the new $342.5 million second-lien loan, and that would replace the current capacity to get $350 million of incremental first-lien term loan and/or revolver debt.

Additionally, the total leverage ratio would be set at 8.0 times until June 30, 2013, 7.75 times until Dec. 31, 2013, 7.5 times until Dec. 31, 2014 and 7.25 times through maturity, and a first-lien leverage ratio would be added of 4.0 times until June 30, 2013, 3.85 times until Dec. 31, 2013, 3.7 times until Dec. 31, 2014 and 3.5 times through maturity.

Pro forma for the restructuring, net leverage would be 6.7 times, gross leverage would be 7.2 times, total secured leverage would be 3.3 times and total first-lien term loan leverage would be 2.7 times.

The amendment would also add a minimum liquidity covenant requiring cash of $75 million at the end of each fiscal quarter, provided that if revolver commitments are less than $125 million, there will be a dollar-for-dollar reduction until the minimum cash requirement is $70 million.

Furthermore, restricted payment capacity would be increased to $297 million from $100 million, divided into $89.5 million for cash distributions to HoldCo and $207.5 million for a second-lien loan, the general basket for investments would be reset to $20 million, and the ability to invest in new unrestricted subsidiaries would be eliminated.

Also, mandatory prepayments would be revised to increase excess cash flow sweeps, additional collateral would be pledged, and the definition of consolidated EBITDA would be changed to eliminate or cap some add-backs.

Travelport needs approval from a majority of its senior secured lenders in order to be able to move forward with the proposed PIK loan restructuring and complete the credit facility amendment.

Consents are due from lenders by 3 p.m. ET on Sept. 23, and extended revolver consents are due by 5 p.m. ET on Sept. 28.

Term loan and non-extended synthetic letter-of-credit facility lenders are being offered a 400 bps amendment fee, and revolver lenders are being offered a 200 bps fee, plus an additional 200 bps if they extend their commitments.

Credit Suisse Securities (USA) LLC and UBS Securities LLC are leading the amendment.

Concurrent with the solicitation of consent for the transaction, Travelport is seeking acceptances of a consensual plan of reorganization to gain acceptance of the transaction if unanimous approval from PIK loan lenders is not obtained.

If the company has to proceed with a consensual plan of reorganization, it would do so through a Chapter 11 filing by Travelport Holdings.

Travelport is an Atlanta-based provider of transaction processing services to the travel industry.

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