Expedia Default Swaps Climb to Three-Month High on Split

The cost to protect debt issued by Expedia Inc. (EXPE) surged after the biggest online travel agency by revenue said it will split into two businesses, giving investors a chance to own shares in its fast-growing TripAdvisor unit.

Credit-default swaps on the company’s debt jumped 17.8 basis points to a mid-price of 172.5 basis points as of 10:15 a.m. in New York, according to broker Phoenix Partners Group. The contracts are at the highest level since Jan. 10, according to data provider CMA.

In a succession event such as a division into two businesses, the company’s debt can remain whole with one entity or be split between each. The contracts tend to climb on succession events because of the uncertainty and because a smaller spun-off entity will likely have a worse credit profile than the parent.

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- Posted: 2011-04-08 10:26:29

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