Expedia says debt could soar on buyback
NEW YORK, June 29 - Expedia Inc. said on Friday its debt could rise by a factor of eight because of borrowing related to its planned buyback of more than one-third of its shares.
In a filing with the U.S. Securities and Exchange Commission, the top online travel company said its debt would rise to about $4.1 billion if it completed the buyback at the top of the range it set. That compares with its debt of about $500 million as of June 15.
"This indebtedness could adversely affect Expedia´s ability to raise additional capital to fund its operations and react to changes in the economy or our industry," the company said in the filing.
On June 19, Expedia, which is controlled by Chairman Barry Diller, said it would tender to buy back 116.7 million shares at a price between $27.50 and $30 each. At the top of the range, the buyback would cost Expedia $3.5 billion.
Following successful completion of the tender offer, which is due to expire on Aug. 8 unless extended, Expedia said Diller´s voting power in the company would increase to 73.7 percent. Diller, who already has majority voting power, holds super-voting Class B shares and has a voting agreement with major Expedia shareholder Liberty Media Holding Corp.
Neither Diller nor Liberty Media plans to sell shares under the tender offer.
Diller, who is also chief executive of Expedia´s former parent IAC/InterActiveCorp, told the travel company´s employees earlier this week that he plans to retain control of the company.
In the filing, Expedia said it believes that the tender offer, along with the increase in debt, is "a prudent use of Expedia´s financial resources."
It added that it expects to have sufficient cash flow to fund its business after the buyback.In afternoon trading, Expedia shares were off 14 cents to $29.35.