Sabre CDS Blows Out On LBO News

The spread on Sabre Holdings' five-year credit default swaps widened 90 basis points to 324 after the company agreed to be acquired by private equity firms Silver Lake Partners and Texas Pacific Group for $5 billion. The deal includes the assumption of $550 million in net debt. Deutsche Bank and Merrill Lynch are providing financing for the transaction, which is anticipated to come to market around April or May.

The Southlake, Texas, online travel booking firm, which owns Web site Travelocity.com, looks certain to lose its investment-grade rating as a result of the deal, according to Markit Group. Moody's Investors Service placed the ratings on Sabre on review for possible downgrade. In a report, Moody's says the LBO is likely to result in a big increase to financial leverage and could result in a multiple notch downgrade of Sabre's $800 million of existing notes. Standard & Poor's placed its BBB corporate credit rating on credit watch with negative implications. Calls to spokesmen for Sabre, Silver Lake and TPG were not returned.