Travelport has entered a standstill agreement with its creditors, according to people familiar with the matter, as the parties haggle over a drop in the company’s value since the start of the pandemic.
The travel technology company, which is co-owned by activist investor Elliott Management, has a deal to hold off lenders for a couple of months in a $1.15 billion dispute over alleged debt defaults. Creditors will refrain from making payment demands that could risk tipping the U.K.-based company into bankruptcy.
The existence of the agreement — previously unreported — should be reassuring news to Travelport employees and partners. It signals that Travelport will operate business as usual for the next couple of months. Creditors and management will haggle, with Travelport hoping lenders knock down the value of a broader array of outstanding loans worth about $2 billion to a smaller total amount, sources said.
“TRAP DOOR”
Some backstory, first: Maine-based payments tech firm WEX backed out in May from a planned $1.7 billion deal to buy Travelport’s shares in eNett and Optal, payment solutions providers.
The day after WEX said it wanted to drop the acquisition, Travelport’s private equity sponsors interpreted the terms of its credit documents to say it had the right to transfer Travelport’s intellectual property assets worth about $1.15 billion to a subsidiary beyond the reach of its secured creditors.
Some lenders call the move a “trap door” in the contract and allege that Travelport’s financial sponsors aren’t allowed to effectively remove Travelport’s intellectual property as loan collateral, sources said. Lenders have threatened to allege a breach of contract and other violations in lawsuits, sources said. Bloomberg News first reported in May that Travelport’s lenders had threatened to claim default.
A UK court has set a September trial date to decide if WEX can get out of buying eNett and Optal.
Travelport can continue to pursue its modernization strategy and service customers even if it loses that battle, sources familiar with the company said.
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