TripAdvisor 2011 Annual Report Download - page 24

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Table of Contents
In addition, it is possible that we may need to incur additional indebtedness in the future in the ordinary course of business. The terms of
our term loan and revolving credit facility will allow us to incur additional debt subject to certain limitations. If new debt is added to current debt
levels, the risks described above could intensify.
The agreements that govern our credit facility contain various covenants that limit our discretion in the operation of our business and also
require us to meet financial maintenance tests and other covenants. The failure to comply with such tests and covenants could have a
material adverse effect on us.
In connection with the Spin-
Off, we entered into a new credit agreement providing for a revolving credit facility with a borrowing capacity
of $200 million and a term of five years, as well as a five-year, $400 million term loan to TripAdvisor Holdings, LLC. The agreements that
govern the term loan and revolving credit facility contain various covenants, including those that limit our ability to, among other things:
These covenants may limit our ability to optimally operate our business.
In addition, our term loan and revolving credit facility require that we meet certain financial tests, including an interest coverage test and a
leverage ratio test.
Any failure to comply with the restrictions of our term loan credit facility may result in an event of default under the agreements governing
such facilities. Such default may allow the creditors to accelerate the debt incurred under thereunder. In addition, lenders may be able to
terminate any commitments they had made to supply us with further funds (including periodic rollovers of existing borrowings).
We may be unable to make the changes necessary to operate effectively as an independent public entity.
As an independent entity, Expedia has no obligation to provide financial, operational or organizational assistance to us, other than (i)
limited services pursuant to the transition services agreement between Expedia and
20
•
Requiring us to dedicate a portion of our cash flow from operations to principal and interest payments on our indebtedness, thereby
reducing the availability of cash flow to fund working capital, capital expenditures, acquisitions and investments and other general
corporate purposes;
•
Making it more difficult for us to optimally capitalize and manage the cash flow for our businesses;
•
Limiting our flexibility in planning for, or reacting to, changes in our businesses and the markets in which we operate;
•
Possibly placing us at a competitive disadvantage compared to our competitors that have less debt;
•
Limiting our ability to borrow additional funds or to borrow funds at rates or on other terms that we finds acceptable; and
•
Exposing us to the risk of increased interest rates because our outstanding debt is expected to be subject to variable rates of interest.
•
Incur indebtedness;
•
Pay dividends on, redeem or repurchase our capital stock;
•
Enter into certain asset sale transactions, including partial or full spin
-
off transactions;
•
Enter into secured financing arrangements;
•
Enter into sale and leaseback transactions; and
•
Enter into unrelated businesses.