Business Context and Reporting Period
Company: Expedia Group, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: May 4, 2020 (Events reported May 4–5, 2020)
Context: The filing details a significant capital raise and credit facility restructuring executed in response to market conditions, involving the issuance of senior notes, amendments to the revolving credit facility, and a private equity investment.
Key Financial Metrics and Capital Structure
- Debt Issuance: Completed a private placement of $2.75 billion in aggregate principal amount of senior unsecured notes due May 2025.
- $2.0 billion of 6.250% Senior Notes.
- $750 million of 7.000% Senior Notes.
- Net Proceeds: Approximately $2,714 million after deducting discounts, commissions, and offering expenses.
- Credit Facility: Amended revolving credit facility with initial aggregate commitments of $2.0 billion, maturing May 31, 2023.
- Equity Investment: Sale of Series A Preferred Stock and warrants to Apollo Global Management and Silver Lake Group (specific investment amounts not detailed in this text).
- Interest Payments: Notes pay interest semiannually beginning November 1, 2020.
Material Changes Versus Prior Period
- Covenant Modifications: The maximum leverage ratio covenant under the credit facility is suspended until December 31, 2021. Upon reinstatement, the maximum permissible leverage ratio is increased until March 31, 2023.
- Covenant Removals: The minimum permissible ratio of consolidated EBITDA to consolidated cash interest expense has been eliminated.
- New Covenants: A minimum liquidity covenant has been added to the credit facility.
- Interest Rate Adjustments: The amended credit facility introduces tiered interest rates based on unused commitments and leverage ratios, with higher rates applicable prior to December 31, 2021.
- Board Composition: Appointment of David Sambur (Apollo) and Greg Mondre (Silver Lake) to the Board of Directors.
Guidance, Outlook, and Risks
- Use of Proceeds: Net proceeds from the notes are intended for general corporate purposes, including the potential repayment or redemption of the Company's 5.95% Senior Notes due 2020.
- Future Financing: The Company agreed to use reasonable best efforts to establish an "Additional Credit Facility" of up to approximately $855 million through non-guarantor subsidiaries.
- Risks and Contingencies:
- Events of Default: The indentures contain customary events of default which could result in the acceleration of the Notes and trigger cross-defaults on other indebtedness.
- 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.
- Redemption Terms: Early redemption of the 6.250% Notes prior to February 1, 2025, and the 7.000% Notes prior to May 1, 2022, requires a "make-whole" premium.
Investor Verification Checklist
- Verify the specific terms and valuation of the Series A Preferred Stock and warrants sold to Apollo and Silver Lake, as this filing references prior agreements for details.
- Confirm the status of the 5.95% Senior Notes due 2020 to determine if they were repaid using the new proceeds.
- Review the full text of the Amended Credit Facility (Exhibit 10.1) to understand the specific mechanics of the new minimum liquidity covenant.
- Monitor the establishment of the proposed $855 million Additional Credit Facility and its impact on the $2.0 billion Amended Credit Facility commitments.
- Assess the impact of the suspended leverage ratio covenant on the Company's financial flexibility through 2021.