KKR’s First Data Plans to Sell $850 Million of Bonds to Reduce Term Loans

First Data Corp., (FDC) the credit card processor bought by KKR & Co. in 2007, plans to sell $850 million of notes to pay down loans.

First Data will offer the bonds due 2019 to repay a portion of its term loans, the company said today in a statement distributed by Business Wire.

There’s “no real credit improvement” for First Data, according to Scott Dinsdale at KDP Investment Advisors Inc. Dinsdale remains concerned about the company’s “substantial leverage” and “increased interest expense associated with taking out low cost bank debt with new notes,” according to a report published today by the Montpelier, Vermont-based credit research firm.

KDP expects the new bonds to be similar in terms and covenants to First Data’s 7.375 percent notes due 2019 and 8.875 percent notes due 2020.

The Atlanta-based company has struggled to reduce borrowings since it was acquired by KKR for $25.6 billion in the 2007 leveraged buyout. First Data had $22.7 billion of total borrowings as of Dec. 31, according to a March 5 regulatory filing.

Fitch Ratings said in December that refinancing its senior secured debt due in 2014, along with a higher rate to extend $1.5 billion of notes due in 2015, may result in “material negative free cash flow” at First Data.

Lender Consent

The company received lender consent to extend $3.2 billion of first-lien term loans to March 2017 from September 2014, said a person with knowledge of the transaction, who declined to be identified because the terms are private.

The extended debt will pay interest at 5 percentage points more than the London interbank offered rate, according to data compiled by Bloomberg. The company was offering lenders a 10 basis-point amendment fee, the data shows.

First Data’s 11.25 percent notes due 2016 have risen 0.25 cent today to 92.5 cents on the dollar, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The bonds yield 13.7 percent.

To contact the reporter on this story: Christine Idzelis in New York at cidzelis@bloomberg.net

To contact the editor responsible for this story: Faris Khan at fkhan33@bloomberg.net

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