Business Context and Reporting Period
Company: Expedia, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: September 21, 2017
Event: Completion of a private placement of senior unsecured notes.
Key Financial Metrics
- Debt Issuance: $1 billion aggregate principal amount of 3.800% senior unsecured notes due February 2028.
- Net Proceeds: Approximately $991 million (after deducting estimated discounts, commissions, and offering expenses).
- Interest Rate: 3.800% per annum, payable semiannually in arrears beginning February 15, 2018.
- Maturity Date: February 15, 2028.
- Guarantees: Fully and unconditionally guaranteed by subsidiary guarantors (domestic subsidiaries that are borrowers or guarantors under the existing credit agreement).
Material Changes and Use of Proceeds
The filing reports the entry into a material definitive agreement regarding the issuance of the Notes. The Company intends to use the net proceeds for general corporate purposes, including:
- Repayment, prepayment, redemption, or repurchase of indebtedness (specifically mentioning the 7.456% senior notes due 2018).
- Working capital, capital expenditures, and acquisitions.
- Dividends, stock repurchases, and investments in subsidiaries.
Terms, Covenants, and Risks
- Redemption: The Company may redeem Notes prior to November 15, 2027, by paying a "make-whole" premium. On or after November 15, 2027, Notes may be redeemed at par.
- Change of Control: The Company is obligated to offer to repurchase the Notes at 101% of principal plus accrued interest upon certain change of control events.
- Covenants: The Indenture includes customary covenants limiting the ability to create liens, enter into sale and lease-back transactions, and consolidate or merge.
- Registration Rights: The Company agreed to file an exchange offer registration statement or a shelf registration statement within 365 days of issuance. Failure to do so (a "Registration Default") triggers an additional interest payment of 0.25% per annum.
- Default Risks: An event of default could result in the acceleration of the Notes and potentially trigger cross-defaults on other indebtedness.
Investor Verification Checklist
- Verify the specific allocation of the $991 million net proceeds, particularly the extent to which the 7.456% senior notes due 2018 will be repaid.
- Review the full text of the Indenture (Exhibit 4.1) for detailed covenants and events of default.
- Monitor the Company's progress on the Registration Rights Agreement to ensure the exchange offer or shelf registration is filed within the 365-day window to avoid the 0.25% interest penalty.
- Assess the impact of the new 3.800% debt on the Company's overall leverage ratios and liquidity position.