GIC invests US$225 million in debt-ridden travel reservation company

[SNAblog]

http://www.bloomberg.com/apps/news?pid=20601102&sid=apJUXmzznHXY

Bloomberg.com, 19 Jan 2010

Travelport Plans $2 Billion London IPO to Cut Debt
By Elisa Martinuzzi and Howard Mustoe

Jan. 19 (Bloomberg) -- Travelport Ltd., the travel reservation company whose owners include Blackstone Group LP, plans to raise $2 billion selling stock in an initial public offering to cut debt.

Travelport, which will list shares on the London stock exchange, is selling a 7.2 percent stake for $225 million to the Government of Singapore Investment Corp. as part of the IPO, the Dublin-based company said in a statement today.

The IPO, the biggest in the U.K. in almost two years, will test the appetite for new stock after sales in Europe slumped, lagging the U.S. and Asia. Leveraged buyout firms are seizing on last year’s decade-high returns in European equity markets to sell assets and give cash back to their own investors.

“It’s not a bad environment to be holding an IPO,” said Carlo Capaul, who helps oversee global stocks among $127 billion of assets at Julius Baer in Zurich. “Investors are buying more stocks. Still if a big IPO were to fail it would create poor sentiment.”

Barclays Capital, Citigroup Inc., Credit Suisse Group AG, Deutsche Bank AG and UBS AG are managing the sale. Bankers typically sound out investors before the company managers meet with prospective buyers.

Travelport posted third-quarter revenue of $570 million, down from $634 million a year earlier. The company owns 48 percent of online booking company Orbitz Worldwide Inc. as well as the Galileo and Worldspan brands.

Cutting Debt

Travelport will use the proceeds of the IPO to cut net debt to $2.3 billion from about $4.1 billion, the company said today on a call with reporters. More than half of the business will be publicly traded after the offering, the company said.

“The business has come through the downturn in good shape and is now poised for cyclical rebound,” Chief Executive Officer Jeff Clarke said.

Other current Travelport investors include Palo Alto, California-based Technology Crossover Ventures; One Equity Partners, the private-equity unit of JPMorgan Chase & Co.; and Travelport’s managers, according to company statements.

The owners plan to offer some of their own shares by selling stock through the so-called over-allotment option, Travelport said in the statement.

GIC agreed in December to invest $225 million in the company in exchange for its stake, and the rest will come from selling shares to money managers.gl

 

[SNAblog]

While private equity funds are heading for the door on Travelport, GIC sees money to be made in this debt-ridden company.

http://www.reuters.com/article/idUSTRE60I16B20100119

Travelport launches $2 billion London IPO

LONDON (Reuters) - New York-based travel service company Travelport launched a $2 billion initial public offering (IPO) to cut debt, with more IPOs on the way as bankers say private equity houses seek to offload companies they own.

The deal, which values the company at least $3 billion, paves the way for an eventual exit of private equity house Blackstone (BX.N), which bought a majority stake in the company from U.S. conglomerate Cendant in 2006.

Travelport, which provides travel services such as wholesale hotel bookings, aims to sell $1.775 billion worth of new shares to institutional investors in the London listing.

Separately, the Government of Singapore Investment Corp (GIC) sovereign wealth fund will buy $225 million worth of new shares at the same time as the IPO, and will as a result hold 7.19 percent of the new equity base.

The IPO is likely to be one of many similar deals this year from private equity firms who are weighed down by the many acquisitions they made at the height of the credit boom.

Bankers are increasingly confident that Europe's IPO market will take off this year and may deliver as much as five times capital raising as in 2009, when the region lagged booming markets in Asia and the United States.

Travelport is selling more than 50 percent of its enlarged share capital, and will see its net debt level drop to $2.3 billion after the listing from $4.1 billion, Chief Executive Officer Jeff Clarke said in a call with journalists.

The ratio of net debt to earnings before interest, debt and amortization of goodwill (EBITDA) will reduce to 3.5 times from 6.5 times now, a person close to the company said, and in the long run to 1.5 to 2 times.

The deal values Travelport at about 14 times 2010 earnings and 8 to 9.5 times enterprise value to EBITDA, in line with peers' 15 times price-to-earnings ratio and 9 times EV/EBITDA.

NOT SO FAST

Blackstone -- which owns a 70 percent stake -- and other shareholders may later sell existing shares, but only if a 15 percent overallotment option is exercised. This is in marked contrast to more audacious exits in the boom years.

Buy-out houses offloaded companies rapidly through the IPO market until the middle of 2007, but reluctant investors are now forcing them to hold stakes in companies after they list, to align the interests of both parties.

"When they private equity firms are looking at the IPO market at the moment, they are not looking at it as a mechanism for an immediate exit," said a London-based banker.

"It's more a mechanism to enhance the capital structure of the asset they have exposure to and over time providing a pathway to exit," he added.

French nursing home Medica which is raising 250 million euros in an IPO, is using a similar structure, whereby its private equity backers only sell existing shares in an overallotment option.

Travelport had been pre-marketed in 2008 but a listing never went ahead because of poor market conditions, a source told Reuters in December. There was also a poor reaction when buy-out house Hellman & Friedman sought to reduce its stake in fund manager Gartmore (GRTR.L) through an IPO last month.

Travelport will start its bookbuilding process on February 1, while shares are expected to begin trading on February 12, a person close to the deal said.

UBS is the sole sponsor for the deal, while Credit Suisse, Deutsche Bank are the joint global co-ordinators, with Barclays Capital and Citigroup as joint bookrunners.gl