Attached files
file | filename |
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8-K - FORM 8-K - Travelport LTD | y92818e8vk.htm |
EX-99.1 - EX-99.1 - Travelport LTD | y92818exv99w1.htm |
Exhibit 99.2
Dewey & LeBoeuf LLP | ||
333 South Grand Avenue | ||
Suite 2600 | ||
Los Angeles, CA 90071-1530 | ||
T (213) 621-6000 | ||
F (213) 621-6100 |
September 22, 2011 |
VIA
ELECTRONIC MAIL AND FEDERAL EXPRESS
Travelport Limited
Travelport LLC
Travelport, Inc.
Travelport Holdings Limited
300 Galleria Parkway
Atlanta, GA 30389
Attention: Eric J. Bock, Esq.
General Counsel
Travelport LLC
Travelport, Inc.
Travelport Holdings Limited
300 Galleria Parkway
Atlanta, GA 30389
Attention: Eric J. Bock, Esq.
General Counsel
Jay M. Goffman, Esq.
Skadden, Aprs. Slate, Meagher & Flom LLP
Four Times Square
New York, NY 10036
Jay.goffman@skadden.com
Skadden, Aprs. Slate, Meagher & Flom LLP
Four Times Square
New York, NY 10036
Jay.goffman@skadden.com
Re:
|
Potential Events of Default Under the Indenture (the Indenture) dated as of August 23, 2006, among Travelport LLC (the Company), Travelport, Inc., the Guarantors (as defined in the Indenture) listed therein, and the Bank of Nova Scotia Trust Company of New York (the Trustee) Respecting the Senior Dollar Floating Rate Notes, the Senior Euro Floating Rate Notes and the 9.875% Senior Notes due 2014 (collectively, the Senior Notes) |
Gentlemen:
I am writing as counsel to several holders of the Senior Notes (the
Noteholders) including holders of more than 25% of the outstanding principal
amount of the Senior Notes regarding potential events of defaults
under the Indenture.1 These include, but are not limited to:
I. | The transfer of $135 million in Second Lien Term Loans to a newly-formed subsidiary (Newco), which is not a Permitted Investment given the definition of |
1 | The analysis set forth herein is also applicable to the Companys 9.0% Senior Notes due 2016. |
Dewey & LeBoeuf LLP is a New York limited liability partnership.
New York | London | Washington, DC | Abu Dhabi | Albany | Almaty | Beijing | Boston | Brussels
Chicago | Doha | Dubai | Frankfurt | Hong Kong | Houston | Johannesburg (pty) ltd. | Los Angeles
Madrid
| Milan | Moscow | Paris | Riyadh affiliated office | Rome | San
Francisco | Silicon Valley | Warsaw
Travelport Limited
September 22, 2011
Page 2
September 22, 2011
Page 2
Investment in the Indenture and the fact that any investment must be with an expectation of an economic return; and | |||
II. | Newcos guarantee of Tranche A (as hereinafter defined), and its subsequent transfer of $135 million in Second Lien Term Loans to the holders of Tranche A, because Newco will be a Restricted Subsidiary at these times, not an Unrestricted Subsidiary as is erroneously assumed in the Restructuring (as hereinafter defined). |
The Noteholders have also concluded that the Companys issuance of $342.5
million in Second Lien Term Loans and payment of $85 million in cash solely for the
benefit of the holders of PIK Notes would likely be fraudulent transfers, given
serious questions whether the Company will be able to pay its debts as a result.
Further, the Noteholders have requested, but been denied, information to back up
the $292 million basket in Section 4.07 of the Indenture, which is inconsistent
with the $240 million estimate provided by the Company on an August 4, 2011,
conference call. The Noteholders are examining all of the remedies they may have
against all relevant parties, including those arising from the violations of
express terms of the Indenture detailed in this letter.
On September 19, 2011, Travelport Limited filed its report under Form 8-K (the
Report) respecting the announcement by the Companys indirect parent, Travelport
Holdings Limited (the PIK Borrower) of an agreement in principal [sic] for a
proposed restructuring (the Restructuring) of the PIK Borrowers senior unsecured
payment-in-kind term loans (the PIK Loans). Exhibit 99.2 to the Report consists
of a Public Lender Presentation (the Presentation) dated September 19, 2011,
which includes a summary description of the Restructuring. We note that earlier
today, Travelport Limited released a report on Form 8-K attaching solicitation
materials respecting a Prepackaged Plan of Reorganization of PIK Borrower,
raising obvious concerns about a potential bankruptcy filing by one or more
counterparties to Holdings and the Company in the Restructuring.
The Restructuring requires the Company to issue $342.5 million in second lien
term loans (the Second Lien Term Loans) to Holdings and for Holdings to (i)
distribute $207.5 million of the Second Lien Term Loans to its direct parent
company, PIK Borrower (the Holdings Distribution), without consideration; and
(ii) transfer $135 million of the Second Lien Term Loans (the Newco Transfer) to
Newco, which will exist solely to play its part in the Restructuring and for no
other apparent purpose. The Restructuring provides for Newco (i) to guarantee (the
Newco Guarantee) $135 million of the PIK Loans (defined in the Presentation as
Tranche A); and (ii) if Tranche A is not repaid by September 30, 2011, to
transfer (the Guarantee Transfer) the $135 million in Second Lien Term Loans
transferred to it by Holdings to the holders of Tranche A of the PIK loans. The
Presentation does not disclose any means by which the PIK
Borrower will repay Tranche A of the PIK Loans on or before the date they
mature, or how the Newco Guarantee will otherwise be performed.
Travelport Limited
September 22, 2011
Page 3
September 22, 2011
Page 3
Section 4.112 of the Indenture provides that Holdings will not and
will not permit any of its Restricted Subsidiaries to make any . . . transfer or
otherwise dispose of any of its properties or assets to . . . or enter into or make
or amend any transaction, contract, agreement . . . or guarantee with or for the
benefit of any Affiliate of Holdings . . . unless each of Sections 4.11(a)(1) and
(2) are satisfied or an exception contained in Section 4.11 (b) applies. The Newco
Transfer is clearly a transfer or disposition of property or assets of Holdings to
Newco (an Affiliate of Holdings) and a transfer or disposition of property or
assets of Holdings for the benefit of PIK Borrower (another Affiliate of Holdings).
None of the exceptions contained in Section 4.11(b) allow the transfer to Newco or
the transfer for the benefit of PIK Borrower.
There can be no question that the Newco Transfer is for the benefit of an
Affiliate, i.e., the PIK Borrower. Under the Restructuring, Holdings will make
the Newco Transfer (of $135 million in Second Lien Term Loans) coincident with the
Newco Guarantee and for the purpose of enabling Newco to subsequently make the
Guarantee Transfer to holders of Tranche A of the PIK Notes. The PIK Notes
evidence obligations of the PIK Borrower, an indirect parent of Holdings and an
Affiliate of Holdings under the Indenture.
Nothing in the Presentation suggests that compliance with Sections 4.11(a)(1)
and (2) is contemplated or could be obtained. Nor do any of the exceptions
contained in Section 4.11(b) apply to the Newco Transfer. Holdings does not appear
to contemplate relying on Section 4.11(b)(1), inasmuch as if Newco is a Restricted
Subsidiary the Newco Guarantee and the Guarantee Transfer are both prohibited by
the Indenture (The reasons why Newco should be regarded as a Restricted Subsidiary
at all relevant times are discussed below.) The exception in 4.11(b)(2) is also
inapplicable.
The Newco Transfer cannot be
a Restricted Payment permitted by Section 4.07 and the definition of Permitted Investments.
The Newco Transfer is not regarded as a Restricted Payment by the Company. Nor is it within the
definition of Permitted Investment. In the Restructuring, the Second Lien Term Loans to be
transferred to Newco are contemplated to be used solely to satisfy the Newco Guarantee via the
Guarantee Transfer to the holders of Tranche A. The Indenture definition of Investment embraces
all investments . . . in the form of . . . advances or capital contributions. It is universal in
the law that all investments have to be made with the aim of generating a return on
the invested capital. E.g., Blacks Law Dictionary (9th ed 2009) (investment [means] [a]n
expenditure to acquire property or assets to produce revenue; a capital outlay);
Woefields Encyclopedia of Banking and Finance (10th ed 1994) at 651 (investing [means] [c]ommitting
capital with the expectation of profit).
2 | The Indenture appears to have a drafting error whereby Sections (a) and (b) thereof were not delineated as such. Section (a) appears to begin at the phrase Holdings will not . . . and Section (b) begins with the phrase The Provisions of Section 4.11(a) . . . |
Travelport
Limited
September 22, 2011
Page 4
September 22, 2011
Page 4
Under the terms of the Restructuring, the Newco Transfer is not being made for
the essential purpose of or with the essential intent of an investment. To the
contrary, it is certain that Holdings will make no profit or income as a result of
the Newco Transfer notwithstanding that the property transferred is subject to a
very substantial risk of loss. Moreover, it is doubtful that Holdings will ever
see a return of any portion of the value of the transferred assets, because they
will be used only to satisfy PIK Borrowers obligations under Tranche A via the
Newco Guarantee or the Guarantee Transfer. The Newco Transfer, therefore, falls
outside the definition of Investment and therefore outside the definition of
Permitted Investment in the Indenture.
The Newco Guarantee and the making of the Newco Transfer will also violate
Section 4.11 of the Indenture because Newco will be a Restricted Subsidiary of
Holdings as of the time of any determination required under Section 4.11. Newco
must be regarded as a Restricted Subsidiary of Holdings unless it is an
Unrestricted Subsidiary. A subsidiary may not be an Unrestricted Subsidiary
if, inter alia, it owns any Indebtedness of Holdings or of any Subsidiary of
Holdings. An Unrestricted Subsidiary is defined as any Subsidiary of Holdings
which at the time of determination is an Unrestricted Subsidiary (as designated by
Holdings as provided below.) Accordingly, any determination whether Holdings has
or has permit[ted] any of its Restricted Subsidiaries to violate Section 4.11 of
the Indenture requires a determination whether relevant Subsidiaries are
Unrestricted Subsidiaries or Restricted Subsidiaries when the possibility of a
violation is to be determined. Under the Indenture, this is to be done, according
to the definition of Unrestricted Subsidiary, not at the time of designation, but
at the time of determination.
Prior designation by Holdings is, therefore, a
necessary, but not a sufficient, condition to evaluate whether a subsidiary should
be regarded as a Restricted Subsidiary for the purpose of determining whether there
has been a violation of the Indenture. To construe the Indenture otherwise would
be inconsistent with the elementary principle of contract interpretation that
language in a contract be given meaning and effect wherever possible. In any
event, it would seem that a subsidiary created for the purpose of holding
Indebtedness of and to hold a Lien on . . . property of Holdings or any
Subsidiary of Holdings can never be an Unrestricted Subsidiary.
In addition to the foregoing, the Newco Transfer violates the Indenture
whether or not the Newco Transfer is a Permitted Investment and whether Newco is
a Restricted Subsidiary or an Unrestricted Subsidiary.. The Newco Transfer is
a transfer to Newco. It is also a transfer for the benefit of the PIK Borrower, an
Affiliate of Holdings. Even assuming that Newco is an Unrestricted Subsidiary
and the Newco Transfer is a Permitted Investment, the exception contained in
Section 4.11(b)(2) at most permits the
initial transfer to be made to Newco. It does not permit the granting of a
benefit to the PIK Borrower.
Travelport Limited
September 22, 2011
Page 5
September 22, 2011
Page 5
For all of the foregoing reasons, any agreement to implement the
Restructuring, and the consummation of the Restructuring, will result in one or
more defaults and Events of Default under the Indenture. Accordingly, the
Noteholders demand that Holdings and its Affiliates cease and desist from taking
any steps to document or consummate the Restructuring.
We have examined publicly available information, including disclosure that the
RPK capacity was estimated at $240 million by the Companys Chief Financial
Officer during a public conference call conducted on August 4, 2011, to determine
whether each of the Holdings Distribution, the $85 million in cash proposed to be
distributed by Holdings to the PIK Borrower, and the Newco Guarantee and/ or the
Newco Transfer are permitted under Section 4.07 of the Indenture. Our initial
calculations, which are based upon admittedly incomplete information, do not
generate sufficient room under the provisions of Section 4.07 of the Indenture to
allow Restricted Payments of approximately $292.5 million as contemplated by the
Restructuring. We therefore request that you provide us with the Companys
calculation of the amounts available in the Restricted Payment basket or, using the
Companys terminology RPK Capacity particularly if that number has changed since
the August 4 conference call or if the disclosure made during that conference call
was inaccurate.
Lastly, it appears self-evident that numerous persons and entities, including
the PIK Borrower, intend, through the Restructuring, to interfere with the
Noteholders contractual rights under the Indenture and otherwise. You should be
assured that the Noteholders will thoroughly investigate all of the rights and
remedies that may arise out of such conduct.
This communication has been drafted under severe time constraints and in the
absence of any information concerning the Restructuring beyond what was included in
the Report. The statements contained herein should be regarded as preliminary in
nature and may be supplemented or revised from time to time.
Travelport Limited
September 22, 2011
Page 6
September 22, 2011
Page 6
The Noteholders reserve all rights and remedies they may have under the
Indenture, the Senior Notes and pursuant to any and all applicable law.
Sincerely, | ||||
/S/Bruce Bennett | ||||
Bruce Bennett |
BM/mah
cc:
|
Travelport Limited | |
405 Lexington Avenue | ||
New York, NY 10178 | ||
Attention: Eric J. Bock, Esq. | ||
The Bank of Nova Scotia | ||
Nova Scotia Trust Company of New York | ||
One Liberty Plaza, 23rd Floor | ||
New York, NY 10006 |
cc via email:
|
Christopher Moore, Esq. | |
cmoore@cravath.com | ||
Alan Kornberg, Esq. | ||
akornberg@paulweiss.com | ||
Mr. Peter Corbell | ||
peter.corbell@moelis.com |