Online travel services company Expedia Inc. is set to tap the corporate bond market for the first time this week, reports AP.

Published: 14 Aug 2006

Online travel services company Expedia Inc. is set to tap the corporate bond market for the first time this week, reports AP.

Last week, the company had announced that it plans to privately offer up to $800 million of senior unsecured notes guaranteed by certain of its subsidiaries. Expedia plans to use the net proceeds of the offering for general corporate purposes, which may include repurchase of common stock, repayment of debt, acquisitions, investments, additions to working capital, capital expenditures and advances to or investments in its subsidiaries.

Expedia’s shares rose 27 cents, or 1.9 percent, to close Monday at $14.86 on the Nasdaq Stock Market.

As per the information available, the company will sell the 10-year senior unsecured notes through joint lead managers JP Morgan Securities Inc. and Lehman Brothers Inc. in a private placement.

Expedia is authorised to repurchase up to $600 million of shares. In the six months ended June 30, the company had repurchased $127 million of shares, as per the information available.

According to AP, the new bond offering will provide a “nice cushion” for the company, which already has a $1 billion five-year unsecured revolving credit facility, Moody’s senior analyst John Moore reportedly said. As of June 30, there was nothing owed under the facility, according to a quarterly filing from the company.

Moody’s rated the offering Baa3, citing Expedia’s dominant position in online travel bookings.

Standard & Poor’s rated the offering triple-B-minus, the equivalent of the Moody’s rating -- just one notch above junk territory. S&P credit analyst Andy Liu warned, however, that the senior unsecured notes could be downgraded one notch below the corporate credit rating “if borrowing under the (revolving credit) facility becomes substantial”.

“The senior unsecured notes are rated at the same level as the corporate credit rating because we expect that Expedia will have a minimal or no outstanding balance on its revolving credit facility,” said Liu. “If borrowing under the facility becomes substantial, we could lower the rating on the senior unsecured notes to one notch below the corporate credit rating.”

Expedia has a 40 percent market share in the third-party online travel services sector, Moody’s Moore said.

“Size in this business matters,” Moore reportedly said.