NEW YORK – Private equity firm KKR & Co LP and its co-investors, which took First Data Corp private for $29 billion in 2007, are making a new $300 million investment in the world's largest payment processing company to help it refinance its debt.
KKR and other small shareholders will receive new convertible preferred equity in First Data in return for their $300 million cash investment, First Data said in a statement on Monday.
The cash will be used, along with $1.4 billion in new senior payable-in-kind (PIK) notes with a 14.5 percent coupon due 2019, to retire most of First Data's $2 billion of 11.5 percent senior PIK notes due 2016.
Frank Bisignano, a former co-chief operating officer for JPMorgan Chase & Co who was brought in earlier this year to run First Data, said the latest deal meant that the maturities of most of the company's debt that dated back to 2007 had been taken care of.
"While the company has successfully extended the maturities for some $21 billion of debt through the second quarter of this year, this agreement allows us to address the junior-most of the debt structure and an element that has been of interest to investors," Bisignano said in the statement.
One of the mega leveraged buyouts that came to epitomize the credit binge that preceded that 2008 financial crisis, First Data has proved to be a challenging investment for KKR, which valued it at 70 cents on the dollar as of the end of June.
KKR and its co-investors invested $7.2 billion as equity in the company in 2007, according to regulatory filings.
"Fitch believes this refinancing is a modest positive for the credit by opening up a path to further extend the company's capital structure... The end result is essentially a viable five-year-plus runway for the company to grow out of its currently highly levered capital structure," the credit rating agency said in a note on Monday.
Since he was named CEO of First Data in April, Bisignano has taken a number of steps to improve profitability, including boosting the proportion of employee compensation that is paid out in stock, a move that Fitch expects to save the company about $60 million in the first year.
First Data's biggest challenge is increasing its cashflow to significantly pay down debt. Before bringing Bisignano onboard, the company explored selling its financial services business to raise cash, but then dropped the idea, people familiar with the matter said at the time.
(Reporting by Greg Roumeliotis in New York; Editing by Carol Bishopric)