Why Interval Leisure's Shares Jumped

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Although we don't believe in timing the market, or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of vacation specialist Interval Leisure Group (Nasdaq: IILG  ) were basking in gains of as much as 12% today, after the company negotiated a new credit facility.

So what: The new agreement will provide the company with $500 million in borrowing capacity, and will replace a $50 million facility and a $150 million term loan. Interest on the new facility is LIBOR plus 1.25% to 2.25%, depending on the level of Interval's overall leverage. The current one-year LIBOR rate is 1.07%.

The company said it may use the new facility to fund general spending, acquisitions, and redemption of its $300 million in 9.5% senior notes, which are callable in September.

Now what: The positive reaction seems a bit outsized given the news … but it is good news. With the previous credit facility and term loan set to expire in 2013, the company obviously needed to do something sooner or later in order to avoid ending up with a funding issue. The simple fact that the company was extended such a large credit line at attractive rates is also a vote of confidence. Finally, if it does use the new facility to buy back its outstanding senior notes, it could get a boost from the interest differential. So, good news for Interval. Just maybe not as good as the share price move might suggest.

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Fool contributor Matt Koppenheffer does not have a financial interest in any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or Facebook. The Fool’s disclosure policy prefers dividends over a sharp stick in the eye.

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