June 6, 2006
Mail Stop 4561
Eric J. Bock
Executive Vice President, Law and Corporate Secretary
Cendant Corporation
9 West 57th Street
New York, NY 10019
Re: Realogy Corporation
Registration Statement on Form 10,
Amendment No. 2 Filed May 30, 2006
Amendment No. 3 Filed June 2, 2006
File No. 001-32852
Dear Mr. Bock:
We have reviewed your amended filings and additional
correspondence dated June 5, 2006 and have the following comments.
Where indicated, we think you should revise your document in
response
to these comments. If you disagree, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
information so we may better understand your disclosure. After
reviewing this information, we may raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
Summary, page 1
The Separation, page 7
Overview, page 7
1. Please make it clear, from page 48, that Cendant expects to
satisfy its corporate debt from the proceeds of each company`s
(yours, Wyndham`s and Travelport`s) borrowings and Cendant`s cash
on
hand.
2. We note that you may be liable for a share of certain Cendant
contingent liabilities. Please briefly describe the nature of
these
liabilities. Also, on page 9, please explain in more detail why
the
value of your share of these liabilities would increase from $688
million to $859 million upon the sale of Travelport.
3. The last sentence of the second paragraph is confusing. It
implies that in the event Travelport is not sold, your share of
any
post-separation adjustment would rise to 62.5% with a $100 million
threshold. Please confirm that the foregoing adjustment terms
would
only apply in the event of a Travelport sale and clarify your
disclosure accordingly. Also, please discuss briefly how post-
separation adjustments would be dealt with in the event that the
Travelport sale occurred prior to the Wyndham distribution but
after
the distribution of Realogy.
Potential Sale of Travelport, page 8
4. We note that you expect to reduce your debt from the separation
agreement from $2.2 billion to between $725 million and $1
billion.
Please revise your disclosure to explain your assumptions in
calculating this estimate, including the sales price of
Travelport,
the form of consideration, and the amount of proceeds to be used
by
Cendant prior to distribution to you and Wyndham, including tax
liabilities, transaction expenses and debt referred to on page 37.
Also, please make it clear in your summary that you may not get
any
cash proceeds at all.
Summary Historical and Unaudited Pro Form Combined Financial Data,
page 21
5. We note that your pro forma financials have been adjusted to
reflect a $71 million liability stemming from guarantees to
Cendant.
Please explain briefly the nature of these guarantees.
The Separation, page 44
Opinion of Evercore Group, LLC, page 55
6. With regard to this and the Duff & Phelps opinions, please file
them as exhibits to this registration statement and revise your
discussion of each to include the final (as opposed to
preliminary)
conclusions regarding fairness and capitalization. Also, please
include in the first paragraph on page 55 that "in determining
fairness, Evercore evaluated the merits of the spin-off relative
to
the alternative of preserving the status quo of Cendant." Refer
to
your response to prior comment 8.
7. With regard to the discussion of the Evercore opinion included
in
your correspondence dated June 5, 2006, we have the following
comments:
* in the fourth and fifth full paragraphs on page 57, please
indicate
what the referenced analyses showed or how they were used to
support
Evercore`s conclusion; and
* at the top of page 58, where you discuss Evercore`s examination
of
select spin-off transactions, please balance the disclosure with a
reference to the performance Cendant`s spin-off of PHH.
Unaudited Pro Forma Combined Financial Statements, page 68
8. We note that your pro forma financial information reflects a
reduction in your borrowings and related interest expense assuming
the receipt of cash proceeds from the sale of Travelport by
Cendant.
Please tell us whether Cendant has a binding arrangement for the
sale
of Travelport. If not, please explain how the sale of Travelport
is
factually supportable for inclusion as a pro forma adjustment.
Refer
to Rule 11-02(b)(6) of Regulation S-X.
9. Notwithstanding our comment above, please tell us how the
estimated cash proceeds from the sale of Travelport is factually
supportable. For instance, we note from your disclosure on page
37
that the consideration from the sale of Travelport may include
non-
cash proceeds. Refer to Rule 11-02(b)(6) of Regulation S-X.
Management`s Discussion and Analysis of Financial Condition and
Results of Operations
Contractual Obligations, page 98
10. Please revise to include the disclosures required by paragraph
13
of FIN 45, including, but not limited to, the approximate term of
the
guarantee, the events or circumstances that would require you to
perform under the guarantee and the maximum potential amount of
future payments (undiscounted) that you could be required to make
under the guarantee. If the guarantee does not provide a
limitation
of the maximum potential future payments, that fact shall be
disclosed. If you are unable to develop an estimate of the
maximum
potential amount, then you should disclose the reasons why you are
unable to develop this estimate.
Financial Statements and Notes
Combined Statements of Cash Flows, page F-5
11. Refer to your response to comment 12 and revised disclosure on
page F-48. We understand that you are currently liable to Cendant
for the current portion of your income tax provision and that such
amount will be forgiven and recorded as a capital contribution by
Cendant in connection with the spin-off on a net basis. In
addition,
we understand that post spin-off you will be responsible for
estimated income tax payments on a standalone basis which will
reduce
operating cash flows. We also note that Cendant automatically
sweeps
cash from your accounts and such amounts swept are not for
specific
payment of cumulative intercompany balances. We continue to
believe
that the change in amounts due to Cendant should be reported on a
net
basis in your statement of cash flows since the substance of the
change in amounts due to Cendant appear to be continuously settled
on
a net basis as evidenced by your classification of these amounts
on a
net basis in your combined balance sheet and anticipated
settlement
in connection with the spin-off. As such, please revise to
present
the change in amounts due to Cendant on a net basis in your
statement
of cash flows.
Generally, net changes in a parent/sub intercompany account are
classified as financing activities in the statement of cash flows.
Classification as a financing activity is consistent with filings
by
other former Cendant subsidiaries. We note the settlement of the
intercompany account will be recorded as a dividend, which would
be
classified as a financing activity. Please revise. If you
continue
to believe a change in classification from other former Cendant
subsidiaries is supported by different facts and circumstances,
which
does not appear to be the case, supplementally explain the basis
for
the classification of the net change as an operating activity.
Note 6, Income Taxes, pages F-34 - F-36
12. We note your revised disclosure that certain of your deferred
tax
assets relate to payments from a former Cendant subsidiary which
results in a deferred tax consequence. Please revise your
disclosure
to clarify the amount of this deferred tax asset, where such
amount
is classified within your net deferred income tax assets and the
nature of the deferred tax asset.
Financial Opinions
13. We note the limitations on reliance contained in the last
paragraph on page 3 of the Evercore opinion and the last paragraph
of
the Duff & Phelps opinion. We also note Duff & Phelps` disclaimer
of
fiduciary duty to Cendant and Realogy shareholders on page 3.
Because they are inconsistent with the disclosures relating to the
opinions, these limitations should be deleted. Alternatively,
please
disclose the basis for the belief that shareholders cannot rely
upon
the opinions to support any claims against the issuer of the
opinions
arising under applicable state law. Please describe any
applicable
state-law authority regarding the availability of such a potential
defense. In the absence of applicable state-law authority, please
disclose that the availability of such a defense will be resolved
by
a court of competent jurisdiction. Also, please disclose that
resolution of the question of the availability of such a defense
will
have no effect on the rights and responsibilities of the board of
directors under applicable state law. Further disclose that the
availability of such a state-law defense would have no effect on
the
rights and responsibilities of either the issuers of the opinions
or
the board of directors under the federal securities laws.
Finally,
please disclose whether Evercore and Duff & Phelps have consented
to
the inclusion of the opinions in the registration statement.
As appropriate, please amend your registration statement in
response to our comments. You may wish to provide us with marked
copies of the amendment to expedite our review. Please furnish a
cover letter with your amendments that keys your responses to our
comments and provides any requested information. Detailed cover
letters greatly facilitate our review. Please understand that we
may
have additional comments after reviewing your amendment and
responses
to our comments.
You may contact Matthew Maulbeck at 202-551-3466 or Josh
Forgione, Assistant Chief Accountant, at 202-551-3431 if you have
questions regarding comments on the financial statements and
related
matters. Please contact Geoffrey Ossias at 202-551-3404 or me at
202-551-3852 with any other questions.
Sincerely,
Michael McTiernan
Special Counsel
cc: Thomas Greenberg (via facsimile, 917-777-7886)
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
Eric J. Bock, Esq.
Cendant Corporation
June 6, 2006
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