First Data Corp., the world’s largest payment processor, is seeking to reduce the rate on a $2.49 billion term loan, according to a person with knowledge of the transaction.
The KKR & Co.-controlled company is proposing to lower the interest rate on the debt due in March 2017 to 3.25 percentage points to 3.5 percentage points more than the London interbank offered rate from 4 percentage points more than Libor, said the person, who asked not to be identified without authorization to speak publicly.
Speculative-grade U.S. companies have lowered borrowing costs on $7.9 billion of loans this year, according to data compiled by Bloomberg, compared with $4.4 billion in the first three weeks of 2013. Demand for the floating-rate debt that rises with benchmarks remains fueled by investors seeking to hedge against rising interest rates.
First Data, based in Atlanta, has more than $22 billion of debt, mostly incurred from KKR’s 2007 leveraged buyout of the company, two months before the start of the worst recession since the Great Depression. Credit Suisse Group AG is arranging the transaction and seeks commitments from lenders at 4 p.m. in New York on Jan. 23, the person said.
The company also is looking to extend the duration of a $183 million loan portion denominated in euros to March 2021, from March 2017, the person said. That loan pays interest at 4 percentage points more than Libor. Neither loan has a minimum on the lending benchmark.
Lenders who choose not to reprice or extend their loans may be repaid at 100 cents on the dollar, the person said.
Chip Swearngan, senior vice president of global communications and investor relations at First Data, didn’t immediately reply to an e-mail seeking comment.
The company has a B3 rating from Moody’s Investors Services, six levels below investment grade and a level associated with companies that offer “poor financial security.” Standard & Poor’s rates the company one grade higher, at B.
First Data last week sold $1.4 billion of 14.5 percent payment-in-kind bonds due in 2019, Bloomberg data show.
Investors poured $70.6 billion into funds that buy leveraged loans last year, and have already funneled $1.9 billion into the asset class this year, according to data provider EPFR Global.