Orbitz 2008 Annual Report Download - page 93

ORBITZ WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. Term Loan and Revolving Credit Facility (Continued)
equal to the higher of the Federal Funds Rate plus one half of 1% and the prime rate ("Alternative Base Rate"). The principal amount of the Term Loan is
payable in quarterly installments of $1.5 million beginning on December 31, 2007, with the final installment of approximately $560 million due upon maturity on
July 25, 2014. However, these payments could change, as beginning with the year ending December 31, 2008, we will be required to make mandatory
prepayments on the Term Loan in an amount up to 50% of our excess cash flow, as defined in the Credit Agreement. At December 31, 2007, $599 million was
outstanding on the Term Loan.
We entered into two interest rate swaps that effectively convert $300 million of the Term Loan to a fixed interest rate (see Note 13—Derivative Financial
Instruments). At December 31, 2007, $300 million of the Term Loan effectively bears interest at a fixed rate of 8.21% through these interest rate swaps. The
remaining $299 million of the Term Loan bears interest at a variable rate of LIBOR plus 300 basis points, or 7.85%, at December 31, 2007.
Revolver
The Revolver provides for borrowings and letter of credit issuances of up to $85 million and bears interest at a variable rate, at our option, of LIBOR plus a
margin of 250 basis points or an Alternative Base Rate plus a margin of 150 basis points. The margin is subject to change based on our total leverage ratio, as
defined in the Credit Agreement, with a maximum margin of 250 basis points on LIBOR-based loans and 150 basis points on Alternative Base Rate loans. We
also incur a commitment fee of 50 basis points on any unused amounts on the Revolver. The Revolver matures on July 25, 2013. At December 31, 2007,
$1 million was outstanding on the Revolver. The amount outstanding bears interest at a rate equal to the Alternative Base Rate plus 150 basis points, or 8.75%, at
December 31, 2007. During the year ended December 31, 2007, commitment fees on unused amounts on the Revolver were almost nil.
We incurred an aggregate of $5 million of debt issuance costs in connection with the Term Loan and Revolver. These costs are being amortized to interest
expense over the contractual terms of the Term Loan and Revolver based on the effective-yield method. Amortization of debt issuance costs was almost nil for
the year ended December 31, 2007.
The Term Loan and Revolver are both secured by substantially all of our and our domestic subsidiaries' tangible and intangible assets, including a pledge of
100% of the outstanding capital stock or other equity interests of substantially all of our direct and indirect domestic subsidiaries and 65% of the capital stock or
other equity interests of certain of our foreign subsidiaries, subject to certain exceptions. The Term Loan and Revolver are also guaranteed by substantially all of
our domestic subsidiaries.
The Credit Agreement contains various customary restrictive covenants that limit our and our subsidiaries' ability to, among other things: incur additional
indebtedness or guarantees; enter into sale or leaseback transactions; make investments, loans or acquisitions; grant or incur liens on our assets; sell our assets;
engage in mergers, consolidations, liquidations or dissolutions; engage in transactions with affiliates; and make restricted payments. The Credit Agreement
requires us to maintain a maximum total leverage ratio and minimum fixed charge coverage ratio, each as defined in the Credit Agreement. As of December 31,
2007, we were in compliance with these covenants.
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Source: Orbitz Worldwide, In, 10-K/A, August 28, 2008