Summary
Expedia Group, Inc. (EXPE) filed an 8-K on February 19, 2009, primarily to report a Fourth Amendment to its Credit Agreement. This amendment, dated February 18, 2009, did not alter the overall size or maturity of the credit facility. However, it introduced more stringent financial covenants, requiring Expedia to maintain a Leverage Ratio of no greater than 2.75:1.00 (down from 3.00:1.00) and a ratio of Consolidated EBITDA to Consolidated Cash Interest Expense of no less than 3.25:1.00. The amendment also adjusted covenants related to subsidiary indebtedness, liens, sale/leaseback transactions, and dividend/repurchase restrictions, along with modifying the definition of Consolidated EBITDA.
Key Highlights
- 1Expedia entered into a Fourth Amendment to its Credit Agreement on February 18, 2009.
- 2The amendment did not change the credit facility size, maturity, lender commitments, or outstanding letters of credit.
- 3New, tighter financial covenants were implemented: Leverage Ratio capped at 2.75:1.00 (previously 3.00:1.00).
- 4A new minimum requirement for the ratio of Consolidated EBITDA to Consolidated Cash Interest Expense was set at 3.25:1.00.
- 5Previous covenants requiring a minimum Consolidated Net Worth were replaced.
- 6Covenants concerning subsidiary debt, liens, and restricted payments (dividends, repurchases) were modified.
- 7The definition of Consolidated EBITDA was also amended.
Frequently Asked Questions
The primary purpose of this 8-K filing is to report the execution of a Fourth Amendment to Expedia's existing Credit Agreement, which was dated February 18, 2009. This amendment modifies certain financial covenants and operational restrictions associated with the company's debt facility.
The new covenants are generally more restrictive. The maximum allowable Leverage Ratio has been reduced from 3.00:1.00 to 2.75:1.00. A new minimum requirement for the ratio of Consolidated EBITDA to Consolidated Cash Interest Expense of 3.25:1.00 has been introduced. The previous requirement for a minimum Consolidated Net Worth has been removed.
No, the filing explicitly states that the amendment had no effect on the size or maturity of the credit facility, the commitments of the lenders, or the letters of credit currently outstanding.
The tighter financial covenants could reduce Expedia's financial flexibility. The lower Leverage Ratio and new interest coverage requirement mean the company must maintain stricter control over its debt levels and earnings relative to interest payments. Modifications to covenants on subsidiary debt, liens, and restricted payments also impose further constraints on its operational and strategic decisions.