Expedia slashes buyback program

Expedia stock tumbled 9.1 percent Monday after the Internet travel agency slashed plans to buy back shares because it can't get acceptable financing.

The stock declined $2.68 to $26.71 Monday, the biggest drop since May 12, 2006.

The Bellevue company led by Chairman Barry Diller said it now will repurchase 25 million shares, or 8 percent of its common stock, compared with the original plan to buy back as many as 116.7 million shares, or about 38 percent of its outstanding stock.

Expedia will use existing bank credit to repurchase the shares for $27.50 to $30 each under a tender offer that expires Aug 8.

The June 19 announcement of the original plan had pushed Expedia shares up $3.64, or 14.3 percent — its biggest one-day gain since the company went public in 2005.

Stock repurchases reduce the number of shares on the market, which increases the value for investors who keep the stock.

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 portfolio manager at Bristlecone Value Partners, which owns Expedia shares. "Financing terms have become a lot less favorable for a lot of people."

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 point to 3.37 percentage points since the day before Expedia announced its share buyback, according to Merrill Lynch index data.

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

Information from The Associated Press is included in this report.