This excerpt taken from the WYN 8-K filed Jul 19, 2006.
Incurrence of Debt
Under the Separation and Distribution Agreement, we, Realogy and Travelport have agreed to take certain actions so that we, Realogy and Travelport, and not Cendant, will bear economic responsibility for general liabilities and obligations of Cendant (including costs and expenses and corporate indebtedness) other than those that relate primarily to Cendants Vehicle Rental business. To effect this arrangement, each of us, Realogy and Travelport anticipate entering into, borrowing facilities at the time of or, in the case of Travelport, prior to its respective separation from Cendant, the cash proceeds of which will be transferred to Cendant to repay Cendants corporate debt and, with respect to the amount transferred by Travelport, to repay other corporate obligations and to fund the actual and estimated cash expenses borne by Cendant relating to the separation. For these purposes, Realogy is expected to borrow approximately $2,225 million at the time of its separation and we expect to borrow approximately $1,360 million at the time of our separation. The allocation of debt among the parties was based upon estimates of the relative future ability of each party to service its debt, each partys ability to maintain acceptable debt ratings and the possibility that Travelport may be sold rather than separated. We anticipate that Cendant will repay its corporate indebtedness at or around the time of our separation.
The Separation and Distribution Agreement provides for an adjustment in the amount of indebtedness we will incur in connection with our separation in the event that the sum of the borrowings transferred by us, Realogy and Travelport to Cendant, together with the cash at Cendant then available to be utilized to repay its
corporate debt, is less than or more than the amount necessary to enable Cendant to make the Separation Payments. Any insufficiency resulting from comparing the sum of the borrowings transferred by us, Realogy and Travelport to Cendant, together with the cash at Cendant then available to be utilized to repay its corporate debt, to the amount necessary to enable Cendant to make the Separation Payments will result in an upward adjustment to the amount of indebtedness allocated to Travelport to the extent that Travelport is able to obtain such additional debt financing on commercially reasonable terms; as a result, such additional amount of Travelport indebtedness will be repaid out of the proceeds of the Travelport sale (if such a sale is thereafter completed) and therefore will reduce the amount of residual proceeds available for distribution to us and Realogy (see Certain Relationships and Related Party TransactionsAgreements with Cendant, Realogy and TravelportSeparation and Distribution Agreement). Any additional insufficiency beyond the additional amount of indebtedness that Travelport could incur on commercially reasonable terms will be satisfied through the incurrence of additional indebtedness by us equal to such remaining insufficiency up to $100 million, and we will transfer such additional amounts to Cendant. To the extent the remaining insufficiency is in excess of $100 million, we and Realogy would be required to incur additional indebtedness equal to 37.5% and 62.5%, respectively, of such excess and transfer such amounts to Cendant. In the event that the borrowings transferred by us, Realogy and Travelport, together with Cendants cash, result in an excess in the amounts necessary to enable Cendant to make the Separation Payments, measured at the time of our separation, then such excess (a priority excess) will be allocated between us and Realogy in the manner described in the next paragraph below.
Any cash costs and expenses related to the plan of separation incurred by Cendant following the date of the adjustment described above that have not otherwise been included in the estimated costs and expenses through the completion of the plan of separation for the purposes of the adjustment will be treated as contingent liabilities under the Separation and Distribution Agreement and therefore borne 37.5% by us and 62.5% by Realogy (or if the sale of Travelport is not completed, we will assume 30%, Realogy will assume 50% and Travelport will assume 20%). If the amount of cash costs and expenses estimated to be incurred prior to the completion of the plan of separation for the above-described adjustment exceeds the actual cash costs and expenses incurred by Cendant, such excess (a Cendant excess amount) will be allocated in the following manner: (i) in the event that a priority excess exists, all or a portion of the Cendant excess amount will be allocated to us and Realogy on a 37.5% and 62.5% basis, respectively, up to the amount of the priority excess and (ii) any remaining Cendant excess amount will be treated as a contingent asset to which we will be entitled to 37.5% and Realogy will be entitled to 62.5% (or if the sale of Travelport is not completed, we will be entitled to 30%, Realogy will be entitled to 50% and Travelport will be entitled to 20%).
In addition, following the completion of the sale of Travelport, Cendant will be obligated, pursuant to the Separation and Distribution Agreement, to contribute a significant portion of the cash proceeds from such sale to us and Realogy. Assuming Cendant receives $4,300 million in gross cash proceeds from such sale and contributes to us approximately $760 million from such sale, we estimate that the approximately $1,360 million of indebtedness we expect to incur at the time of our separation would be reduced to approximately $600 million. The actual amount of our remaining indebtedness may be more or less than the amount provided above depending on various adjustments, including, without limitation, purchase price adjustments based on the levels of cash, working capital and certain other expenses at Travelport at the time of its sale, the application of sale proceeds that have priority over contributions to us and the amount outstanding at the time of our distribution under Cendants asset-linked facility relating to certain assets of Cendants Hospitality Services (including Timeshare Resorts) businesses (for a detailed description of the use of proceeds from the sale of Travelport, see Certain Relationships and Related Party TransactionsAgreements with Cendant, Realogy and TravelportSeparation and Distribution Agreement).