Online travel-booking company
) recently announced the pricing of senior unsecured notes
aggregating $500 million. These bonds carry a coupon rate of 4.50%
and are due to mature in 2024. The offering is expected to close on
Aug 18, 2014, subject to customary closing conditions.
Management stated that the net proceeds would be used to fund the
potential acquisition of the Australian website, Wotif.com and for
other corporate purposes. Last month Expedia had announced its
plans to acquire Wotif.com for about $658 million.
Expedia's debt issue was assigned a Ba1 rating by leading credit
rating agency Moody's along with a stable outlook. Investors seemed
unaffected by the news as share price movement was muted in the
subsequent trading sessions.
The rating agency has assigned the Ba1 rating based on its optimism
regarding Expedia's consistent strong operating performance in the
online travel market in the coming years. The rating agency expects
Expedia to deliver above market growth rate even in the presence of
increasing competition from Orbitz Worldwide (
), Ctrip (
) and Priceline (
). It believes that the company will continue to benefit from
increasing online penetration of travel expenditures, especially in
Moody's assigned a stable outlook on the rating based on persistent
revenue growth performance by Expedia. The agency believes that its
improved performance will continue in the future too, as the
company will continue to leverage from technology and sales and
marketing investments made in the past years.
The rating agency is also positive about The Wotif acquisition. The
company continues to grow both in the U.S. and internationally,
driven by secular growth in the online travel booking industry.
Rating affirmations or upgrades from credit rating agencies play an
important part in retaining investor confidence in the stock as
well as in maintaining credit worthiness in the market. Moody's Ba1
rating is an investment grade rating, indicating speculative
elements grade obligations with substantial credit risk.
Expedia currently sports a Zacks Rank #1 (Strong Buy).
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