Visa to Deposit $1.57 Billion Into Litigation Escrow Account
Visa to Deposit $1.57 Billion Into Litigation Escrow Account
Andrew Harrer/Bloomberg
Visa Inc. credit and debit cards are arranged for a photograph in Washington, D.C.
Visa Inc. credit and debit cards are arranged for a photograph in Washington, D.C. Photographer: Andrew Harrer/Bloomberg
Visa Inc. (V), the world’s biggest bank- card network, will deposit $1.57 billion into its litigation escrow account, the biggest addition in three years as the company prepares to resolve price-fixing accusations.
Visa will draw on funds allocated to a $2 billion Class A share-buyback announced this year, the San Francisco-based company said today in a statement. Because of Visa’s multiple- class system of shares, the move will have the same effect on earnings per share as repurchasing Class A stock, it said.
Merchants sued Visa, MasterCard Inc. and banks including JPMorgan Chase & Co. in 2005, claiming that the companies squelched competition by banning merchants from steering customers to cheaper forms of payment. An accord may cost $4 billion, and in February, the defendants agreed that Visa would be responsible for two-thirds of any settlement.
Transferring money away from buybacks “will exhaust all funds available under that program,” Visa said. Class A shares rose 50 cents to $101.40 at 10:27 a.m. in New York.
A settlement of the case, which involves interchange or “swipe” fees on credit cards, may be at least $4 billion, according to MasterCard (MA)’s estimate in November of a possible loss of at least $500 million. Purchase, New York-based MasterCard would be responsible for about one-eighth of the settlement.
Visa didn’t specify a purpose for today’s addition to the escrow account. The company deposited $1.2 billion into the account in its 2011 fiscal year, which ended on Sept. 30, and paid out $280 million, increasing the size to $2.86 billion.
The firm said in its November annual regulatory filing that the $2.7 billion uncommitted balance of the account was deposited “primarily with a view toward resolving” the price- fixing litigation.
To contact the reporter on this story: Michael J. Moore in New York at mmoore55@bloomberg.net
To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net
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