Expedia slashes buyback plan over debt concerns

Shares of Bellevue-based Expedia, fell the most in more than a year after the Internet travel agency slashed plans to buy back shares because it can't get acceptable financing.

Expedia stock declined $2.68, or 9.12 percent to $26.71.The company will repurchase 25 million shares, or 8 percent of common stock. Its original plan called for buying back as many as 116.7 million shares.

Expedia, the world's largest online travel agency, is coming up against investor skittishness about debt loads on concerns that losses from bonds backed by subprime mortgages will spread to other assets. The company said in June that its debt may rise eightfold to $4.07 billion from financing the original plan.

"It's one more little flag that goes up, that raises concern about the equity market in general," said Jean-Luc Nouzille, a Los Angeles-based portfolio manager at Bristlecone Value Partners, which owns Expedia shares. "Financing terms have become a lot less favorable for a lot of people."

Expedia will repurchase the shares for $27.50 to $30 each under a tender offer that expires Aug 8. The June 19 announcement for the original plan sent the shares to the biggest one-day gain since the company went public in 2005.

At least 20 companies have canceled or postponed debt offerings since June 26 as credit markets grow tighter.

The extra yield investors demand to own high-risk, high- yield, or junk-rated corporate bonds has jumped 0.85 percentage points to 3.37 percentage points since the day before Expedia announced its share buyback, according to Merrill Lynch & Co. index data.

"The terms available to us in the current debt market environment were simply unacceptable," Expedia Chairman Barry Diller said in a statement today.