S&P cuts Expedia's rating to junk; Moody's may cut too

NEW YORK, June 19 (Reuters) - Standard & Poor's on Tuesday cut its rating for Expedia Inc. (EXPE.O) to junk status and said it may cut further, citing the online travel company's plan to buy back more than a third of its shares.

Separately, Moody's Investors Service said it may cut Expedia's rating into junk territory as well.

Expedia said on Tuesday it would buy back shares for up to $3.5 billion, at a premium of at least 8 percent to Monday's closing price. For details, see [ID:nN19474106].

"This represents a dramatic change in Expedia's previously investment-grade financial policy," S&P said in a statement.

"Upon completion, the tender offer will increase debt leverage, reduce liquidity and curtail discretionary cash flow," S&P said.

S&P lowered Expedia's ratings one notch to "BB-plus," one step into junk territory, from "BBB-minus." The rating agency said it also may cut the company again.

Moody's said it may downgrade the company's rating several notches if the auction goes as planned and is financed with debt.

Expedia holds a "Baa3" senior unsecured rating from Moody's, just one step above junk status.

Expedia's 7.456 percent notes due to mature in 2018 are trading at 243 basis points over U.S. Treasuries, compared with 194 basis points after its last reported trade on June 12, according to MarketAxess.