Good news for Travelport Worldwide and subsidiary Travelport Finance (Luxembourg) SARL. Both were upgraded on October 2, 2020 by S&P to CCC+, after completing a debt restructuring and exchange. As we’ve reported previously – and all over the financial press – Travelport was previously up in arms against its lenders and much huffing and puffing by lawyers on both sides was previously going on. That’s behind us now since a September 17 agreement where the company – and its sponsor Elliott Management – agreed not to spin off intellectual property rights and lenders agreed to advance more monies, and not call a default. Importantly – because all BDC exposure is concentrated therein – the company’s 2026 Term Loan has been given a rating of CCC-, up from D.
By no means is the business of the company – tied to the much suffering global travel and tourism industries – out of the woods yet. Liquidity has been bolstered by the restructuring and the immediate threat of lender foreclosure has passed but S&P is making forecasts about revenue levels and profits in the rest of 2020 and 2021 that must – under current conditions – be not much more than glorified guesses.
Nonetheless, the BDC Reporter is upgrading GSO Blackstone’s position to CCR 3 from CCR 4 , which is good news for the non-traded BDC which had written down its nearly $100mn debt by nearly ($30mn). Some positive reversal is likely in the IIIQ 2020. Likewise Garrison Capital (GARS) – which had placed its $2.6mn in the 2026 debt on non accrual and taken a (34%) haircut as of June – will be able to return the debt to accrual status. We’ve also removed Travelport from our Weakest Links category, as the prospect of a default now recedes, albeit after being very close to being forced into bankruptcy and a contentious dispute between the parties.
The BDC Credit Reporter, though, is not done with Travelport. We expect that we’ll be revisiting the status of the company and the substantial exposure (by Blackstone/GSO at least) for some time to come. After all, there are still 6 years left on the loan and S&P is only granting the position one of its weakest ratings. Over at Moody’s, which also adjusted its ratings on September 28, 2020, the view is that they “continue to perceive Travelport’s capital structure as unsustainable due to the continued operating performance weakness and the overall uncertainties around the extent of recovery“. Maybe a CCR 3 rating is too generous…