First Data Debt Falls as Shannon Resigns, Investors Pull Out of Junk Funds
First Data’s $2.2 billion of 9.875 percent bonds due in 2015 fell 5.125 cents to 78.25 cents on the dollar as of 2:34 p.m. in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The debt was quoted at 93.56 cents on the dollar as recently as April 15.
The leadership change at the credit-card processor, bought by KKR & Co. at the height of the takeover boom in 2007 for $27.5 billion, may indicate the private-equity firm plans to exert more influence, said Dave Novosel, an analyst with corporate bond research firm Gimme Credit LLC in Chicago.
“It’s a mismanaged company where growth has been quantitative rather than qualitative,” said Stan Manoukian, an analyst at Independent Credit Research in Los Angeles, who recommended investors sell First Data’s 9.875 percent bonds on Sept. 16, when they traded at 95 cents on the dollar. “They haven’t been able to integrate companies they’ve acquired over the years.”
First Data’s earnings before interest, taxes, depreciation and amortization fell to $424 million last quarter, compared with $472 million for the same period a year earlier, the company said May 14 in a statement.
First Data bonds typically trade in line with stocks, said Chip Swearngan, a company spokesman.
“The assessment of our many operations and technology platforms inside and outside the U.S. is critical to our long- term success,” he said.
Ditching Corporate Bonds
Shannon agreed to remain at the Atlanta-based company through June 30, First Data said today in a regulatory filing. Ray Winborne will serve as acting chief financial officer, while Chief Technology Officer Kevin Kern has been promoted to executive vice president global operations and technology, according to a statement distributed by Business Wire.
Investors are ditching corporate bonds at the fastest pace in 19 months and turning to the safety of Treasuries amid concern that Europe’s debt problems will slow economic growth. High-yield debt has lost 3.6 percent this month, on pace for the first monthly drop since February 2009, according to Bank of America Merrill Lynch index data.
Redemptions from high-yield funds “topped $1 billion” in the third week of May, according to EPFR Global, a research firm in Cambridge, Massachusetts, that tracks fund flows. That followed $2.1 billion of redemptions a week earlier, according to EPFR.
First Data’s $3.5 billion of 10.55 percent pay-in-kind notes due in 2015 fell 5.5 cents to 72.5 cents on the dollar, Trace data show.