Moody's Lifts Outlook on Travelport Worldwide (TVPT) to Positive; Ratings Affirmed

August 23, 2016 11:16 AM EDT

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Moody's Investors Service, ("Moody's") has changed the outlook on the ratings of Travelport Limited (Travelport or the company)(NYSE: TVPT) to positive from stable.

The change in outlook takes into account the following factors:

- Financial policies targeting debt reduction

- Substantial deleveraging in 2016 and expectations that Moody's-adjusted leverage will reduce towards 5x in the next 12-18 months

- Growth momentum driven by a stable air travel base and growth from airline merchandising solutions, hotel and other travel and payments services

- Solid cash generation

At the same time, Moody's has affirmed Travelport's corporate family rating (CFR) of B2, and the B2 instrument ratings on the USD2.3 billion senior secured term loan maturing in 2021 and USD125 million senior secured revolving credit facility maturing in 2019, issued by Travelport Finance (Luxembourg) S.a.r.l. In addition Moody's has affirmed Travelport's probability of default rating (PDR) of B3-PD.

A complete list of affected companies and rating actions can be found at the end of this press release.

RATINGS RATIONALE

Travelport operates a global distribution system (GDS) for the travel industry and is the third largest of the main three global operators measured by share of global air bookings, alongside Amadeus IT Holding, S.A. (Amadeus - Baa2, stable) and Sabre Holdings Corporation (Sabre - Ba2, stable). Whilst its core business is in air travel this provides a solid platform for the sale of merchandising solutions, hotels and other travel inventory and other services to travel providers, through which the company has a solid track record of revenue growth. Recent trading is strong as the effect of adverse changes in the legacy Orbitz contract unwinds and the underlying business demonstrates solid growth momentum. In addition the company has a financial policy in place focused on deleveraging with limited acquisitions and no material deviations in historical dividend distributions levels are expected. As a result Moody's expects leverage to reduce towards 5.0x on a Moody's-adjusted basis within the next 12-18 months.

Counter-balancing these positive characteristics, Travelport operates in a competitive market and it has gradually lost market share in air travel, principally to Amadeus. More recently this has been due mainly to the multi-GDS renewal of a previously sole-source legacy agreement with Orbitz Worldwide in 2014. This has affected market share in the United States, whilst non-US air share, representing over 70% of travel commerce platform revenues, has remained more stable. Travelport does not have the same high level of resilient airline technology services revenues as Sabre or Amadeus and relies to a greater extent on its ability to upsell additional products and services. In addition the industry is at risk of disintermediation through new technologies or through travellers' use of airlines' own websites. However the pace of market change has been slow with high airline retention rates and Travelport has maintained broadly flat air travel volumes as gradual market share declines are offset by underlying market growth.

Rating Outlook

The positive outlook reflects Moody's expectations that Travelport will continue to grow its revenues and EBITDA, with positive cash generation and debt repayments, leading to continued deleveraging.

What Could Change the Rating - Up

The rating could be upgraded if Travelport succeeds in bringing leverage down sustainably below 5.0x Moody's-adjusted debt/EBITDA, whilst generating positive free cash flow.

What Could Change the Rating - Down

Negative pressure would likely be exerted on the rating should leverage increase sustainably above 6.0x debt/EBITDA on a Moody's-adjusted basis, if cash flows were to trend towards zero or if any liquidity concerns arise.

List of affected ratings: Affirmations:

..Issuer: Travelport Limited

.... Corporate Family Rating, Affirmed B2

.... Probability of Default Rating, Affirmed B3-PD

..Issuer: Travelport Finance (Luxembourg) S.a.r.l.

....BACKED Senior Secured Bank Credit Facility, Affirmed B2

Outlook Actions:

..Issuer: Travelport Limited

....Outlook, Changed To Positive From Stable

..Issuer: Travelport Finance (Luxembourg) S.a.r.l.

....Outlook, Changed To Positive From Stable

The principal methodology used in these ratings was Business and Consumer Service Industry published in December 2014. Please see the Ratings Methodologies page on www.moodys.com for a copy of this methodology.



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