KKR’s First Data Issues $785 Million of Bonds, Obtains Term Loan

First Data Corp., the credit-card processor acquired by KKR & Co. in 2007, raised $785 million in eight-year bonds and got a $258 million term loan to refinance debt.

The company’s 11.25 percent notes yield 987 basis points more than similar-maturity Treasuries, according to data compiled by Bloomberg. The debt, which is non-callable for three years, is rated B- by Standard & Poor’s, the ratings company said today.

First Data, which has lost money every quarter since the buyout, will use proceeds to repurchase its 10.55 percent payment-in-kind notes due 2015, the Atlanta-based company said today in a regulatory filing.

“I don’t see any operational problems, they just have a tremendous amount of debt,” Marc Gross, a money manager at RS Investments in New York who oversees $3 billion in fixed-income funds, said in a telephone interview. “They’ve been struggling under the burden of the buyout. Obviously the global recession didn’t help.”

First Data had $22.7 billion in debt at the end of the third quarter, more than the $22.4 billion owed immediately after its LBO, Bloomberg data show.

September Sale

The company previously sold debt in September, offering an additional $850 million of 6.75 percent securities issued the previous month at 479 basis points more than similar-maturity Treasuries, Bloomberg data show. The bonds were quoted at 103.8 cents on the dollar to yield 6.12 percent yesterday, according to prices compiled by Bloomberg.

Citigroup Inc., Deutsche Bank AG, HSBC Holdings Plc, Wells Fargo & Co., Bank of America Corp. and Credit Suisse Group AG managed the bond offering, Bloomberg data show.

First Data was taken private in September 2007 for $26 billion by KKR, the New York-based private-equity firm founded by Henry R. Kravis and George R. Roberts. The deal was the fifth-largest LBO by announced total value, the data show.

Chip Swearngan, a First Data spokesman, declined to comment on the bond offering and referred to the company’s fourth-quarter earnings release and conference call conducted yesterday.

The company also got a term loan to refinance debt maturing in 2014, according to a person with knowledge of that transaction.

The loan, due in 2018, will pay interest at 5 percentage points more than the London interbank offered rate with no floor, said the person, who asked not to be identified because the information is private.

First Data sold the loan at par, compared with 99.75 cents on the dollar proposed earlier today, the person said, increasing proceeds for the company and reducing the yield to investors. Credit Suisse Group AG arranged the financing, which began trading late today, according to the person.

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