Orbitz 2010 Annual Report Download - page 14

Washington, D.C. Mr. Shaughnessy received a Bachelor of Science degree from Northern Michigan University
and a J.D. and a Masters of Public Policy from the University of Michigan.
Item 1A. Risk Factors.
Our results of operations and financial condition have been and may continue to be substantially and adversely
impacted by the economic downturn and our level of indebtedness increases our sensitivity to this risk.
While we have seen recent improvement in consumer spending, the global economy continues to suffer
following the deterioration in the capital markets and related financial crisis in the second half of 2008. Both
our customers and suppliers have felt the impact of this downturn. Several U.S. airlines have implemented
capacity reductions in the face of slowing customer demand and are under increased pressure to reduce their
overall distribution costs. The weakness in the economy has also negatively impacted consumer spending
patterns, including spending on travel. If consumer demand for travel and the products offered on our websites
continues to decrease, our revenue may decline further.
If economic conditions do not continue to improve, or worsen, our results of operations and financial
condition could be materially adversely impacted. In addition, a substantial or prolonged material adverse
impact on our results of operations and financial condition could affect our ability to satisfy the financial
covenants in our senior secured credit agreement, which could result in our having to seek amendments or
waivers from our lenders to avoid the termination of commitments and/or the acceleration of the maturity of
amounts that are outstanding under our term loan and revolving credit facility. The cost of our obtaining an
amendment or waiver could be significant, and could substantially increase our cost of borrowing over the
remaining term of our senior secured credit agreement. Further, there can be no assurance that we would be
able to obtain an amendment or waiver. If our lenders were unwilling to enter into an amendment or provide a
waiver, all amounts outstanding under our term loan and revolving credit facility would become immediately
due and payable.
Our liquidity has been, and may continue to be, negatively impacted.
The weak and volatile conditions in the global financial markets and financial sector caused a substantial
deterioration in the capital markets in late 2008 and early 2009. We experienced the negative effects of this
instability when Lehman Commercial Paper Inc. (“LCPI”) filed for bankruptcy in October 2008. LCPI held a
$12.5 million commitment under our revolving credit facility, and its bankruptcy effectively reduced the total
availability under our revolving credit facility from $85 million to $72.5 million. In the last half of 2009, the
capital markets improved and in January 2010, PAR Investment Partners, L.P. (“PAR”) exchanged $50 million
aggregate principal amount of term loans outstanding under our senior secured credit agreement for
8,141,402 shares of our common stock, and Travelport concurrently purchased 9,025,271 shares of our
common stock for $50 million in cash, which has improved our overall liquidity. Nevertheless, in the future,
we may require more liquidity than is available to us under our revolving credit facility as a result of changes
in our business model, changes to payment terms or other supplier or regulatory agency-imposed requirements,
lower than anticipated operating cash flows or other unanticipated events, such as unfavorable outcomes in our
legal proceedings. The liquidity provided by cash flows from our merchant model bookings could be reduced
if our suppliers, including credit card processors and hotels, changed their payment terms or imposed other
requirements on us, or if our merchant model bookings declined as a result of current economic conditions or
other factors.
If in the future, we require more liquidity than is available to us under our revolving credit facility, we
cannot be certain that funding would be available to us or be available on attractive or acceptable terms. If
funding is not available when needed, or is available only on unfavorable terms, we may be unable to take
advantage of potential business opportunities or respond to competitive pressures, which in turn could have a
material adverse impact on our results of operations and liquidity.
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