Expedia 2009 Annual Report Download - page 25

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In addition, we have experienced, and may experience declines in seasonal liquidity and capital provided by
our merchant hotel business, which has historically provided a meaningful portion of our operating cash flow.
The extent of such impact is dependent on several factors, including the rate of growth of our merchant hotel
business, payment terms with suppliers and relative growth of businesses which consume rather than generate
working capital, such as our agency hotel, advertising and managed corporate travel businesses.
We have significant long-term indebtedness, which could adversely affect our business and financial
condition.
As of December 31, 2009, the face value of our long-term indebtedness totaled $895 million. Risks relating
to our long-term indebtedness include:
• Increasing our vulnerability to general adverse economic and industry conditions;
• Requiring us to dedicate a portion of our cash flow from operations to 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 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;
• Possible refinancing risk if certain of our senior note issues are put by holders in 2013;
• Placing us at a competitive disadvantage compared to our competitors that have less debt; and
• Limiting our ability to borrow additional funds or to borrow funds at rates or on other terms we find
acceptable.
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 credit facility and the indentures governing our outstanding senior notes
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 governing our indebtedness 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.
The agreements governing our indebtedness contain various covenants, including those that restrict our
ability to, among other things:
• Borrow money, and guarantee or provide other support for indebtedness of third parties including
guarantees;
• Pay dividends on, redeem or repurchase our capital stock;
• Make investments in entities that we do not control, including joint ventures;
• 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.
These covenants may limit our ability to effectively operate our businesses or maximize stockholder value.
In addition, our credit facility requires 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 credit facility or any agreement governing our other
indebtedness may result in an event of default under those agreements. Such default may allow the creditors to
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