Private Equity News & Analysis

Blackstone injects further $50m in Orbitz

The travel website, which went public in what was called ‘the worst IPO in 2007’, will use proceeds to pay down debt.

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The Blackstone Group has agreed to inject $50 million in online travel agent Orbitz in exchange for about 9 million newly issued shares after the company reported a profit of $7 million in the third quarter.

The deal with Blackstone, which already controlled more than half the company, is being made simultaneously with a $50 million debt exchange in the company by PAR Investment Partners. PAR has agreed to exchange $49.68 million of senior term debt for 8.16 million share of the company’s common stock.

Orbitz will pay off $50 million in debt with the proceeds of the transaction, and use the rest for “additional operating flexibility as we pursue the growth of our global hotel distribution business”, Barney Harford, president and chief executive officer of Orbitz, said in a statement.

The Blackstone investment is being made through the firm’s portfolio company, Travelport, which Blackstone acquired in 2006 for $4.3 billion from US services group Cendant. At the time of the acquisition, Travelport controlled Orbitz, and took the company public in 2007, retaining a stake of about 55 percent. The deal will cut Blackstone’s stake in Orbitz slightly because of dilution, the company said in a statement.

Blackstone partially exited Orbitz in 2007 in the IPO, raising $150 million in the float, which was called “the worst IPO of 2007” by one financial blog and widely panned by others. The IPO eventually priced at $15 a share, below the expected range of $16 to $18 dollars per share, and quickly sunk to the $12 range, where it lingered for several months until it dropped further toward $9 by the end of 2007. Orbitz shares were trading around $5.48 near mid-day Monday.

Orbitz on Monday reported earnings of $7 million in the three months ended 30 September, 2009, compared to losses of $287 million in the same period last year.

Blackstone recently reported earnings of $275 million in the third quarter, driven in part by increasing revenues in the listed firm’s private equity portfolio.