TEXT-Fitch rates First Data Corp proposed notes 'CCC+/RR6'
Jan 30 - Fitch Ratings has assigned a 'CCC+/RR6' rating to First Data Corp.'s (FDC) proposed offering of $785 million in senior unsecured notes due 2021. Proceeds from the offering will be used to finance the company's tender offer for its 10.55% senior unsecured notes due 2015. In addition, FDC is seeking an addition to its 2018 senior secured term loan, rated 'BB-/RR2', to refinance its remaining $255 million in senior secured term loans due 2014. Upon successful completion of these transactions, FDC will have only its $784 million in senior unsecured notes due 2015 maturing within the next three years-plus. Fitch continues to rate FDC's Issuer Default Rating (IDR) at 'B' with a Stable Outlook. Fitch revised FDC's Outlook to Stable from Negative earlier in January based on improved operating results during 2012 as well as the extension and refinancing of a significant majority of the company's previously forthcoming term loan maturities in 2014. For a more detailed rationale behind the rating action, please see the press release dated Jan. 8, 2013. Liquidity as of Dec. 31, 2012 was solid with cash of $608 million ($324 million of which was available to the company in the U.S.) and approximately $1.5 billion available under a $1.52 billion senior unsecured revolving credit facility, approximately $500 million of which expires September 2014 and the rest expiring September 2016. Fitch estimates that FDC generated approximately $136 million in free cash flow over the latest 12 month period which further adds to liquidity. Total debt as of Dec. 31, 2012 was $23 billion, which includes approximately $15.6 billion in secured debt, $4.5 billion in unsecured debt and $2.5 billion in subordinated debt (all figures approximate). In addition, a subsidiary of New Omaha Holdings L.P. (the direct parent company of First Data Corp.) has outstanding $1.75 billion senior unsecured PIK notes due 2016. These notes are not obligations of FDC and are not consolidated. For an in-depth review of Fitch's credit analysis and outlook for FDC, please see the report published June 6, 2012. Fitch currently rates FDC as follows: --Long-term IDR at 'B'; --$499 million senior secured revolving credit facility expiring September 2013 at 'BB-/RR2'; --$1 billion senior secured revolving credit facility expiring September 2016 at 'BB-/RR2'; --$255 million senior secured term loan B due 2014 at 'BB-/RR2'; --$2.7 billion senior secured term loan B due 2017 at 'BB-/RR2'; --$4.7 billion senior secured term loan B due 2018 at 'BB-/RR2'; --$750 million senior secured term loan B due 2018 at 'BB-/RR2'; --$1.6 billion 7.375% senior secured notes due 2019 at 'BB-/RR2'; --$510 million 8.875% senior secured notes due 2020 at 'BB-/RR2'; --$2.2 billion 6.75% senior secured notes due 2020 at 'BB-/RR2'; --$2 billion 8.25% junior secured notes due 2021 at 'CCC+/RR6'; --$1 billion 8.75%/10% PIK Toggle junior secured notes due 2022 at 'CCC+/RR6'; --$784 million 9.875% senior unsecured notes due 2015 at 'CCC+/RR6'; --$748 million 10.55% senior unsecured notes due 2015 at 'CCC+/RR6'; --$3 billion 12.625% senior unsecured notes due 2021 at 'CCC+/RR6'; --$2.5 billion 11.25% senior subordinated notes due 2016 at 'CCC/RR6'. The Rating Outlook is Stable. The Recovery Ratings (RRs) for FDC reflect Fitch's recovery expectations under a distressed scenario, as well as Fitch's expectation that the enterprise value of FDC, and hence recovery rates for its creditors, will be maximized in a restructuring scenario (as a going concern) rather than a liquidation scenario. In deriving a distressed enterprise value, Fitch applies a 15% discount to FDC's estimated operating EBITDA (adjusted for equity earnings in affiliates) of approximately $2.4 billion for the LTM ended Sept. 31, 2012, which is equivalent to Fitch's estimate of FDC's total interest expense and maintenance capital spending. Fitch then applies a 6x distressed EBITDA multiple, which considers FDC's prior public trading multiple and that a stress event would likely lead to multiple contraction. As is standard with Fitch's recovery analysis, the revolver is fully drawn and cash balances fully depleted to reflect a stress event. The 'RR2' for FDC's secured bank facility and senior secured notes reflects Fitch's belief that 71%-90% recovery is realistic. The 'RR6' for FDC's second lien, senior and subordinated notes reflects Fitch's belief that 0%-10% recovery is realistic. The 'CCC/RR6' rating for the subordinated notes reflects the minimal recovery prospects and inherent subordination in a recovery scenario. SENSITIVITY/RATING DRIVERS WHAT COULD TRIGGER A RATING ACTION Future developments that may, individually or collectively, lead to positive rating action include: --Greater visibility and confidence in the potential for the company to access the public equity markets. Future developments that may, individually or collectively, lead to negative rating action include: --The ratings could be downgraded if FDC were to experience sustained market share declines or if typical price compression accelerates. --The ratings could also be downgraded if the U.S. economy were to experience a sustained recession. Additional information is available at 'www.fitchratings.com'. The ratings above were unsolicited and have been provided by Fitch as a service to investors. Applicable Criteria and Related Research: --'Corporate Rating Methodology', dated Aug. 8, 2012; --'Evaluating Corporate Governance', dated Dec. 12, 2012; --'Rating Technology Companies', dated Aug. 9, 2012. Applicable Criteria and Related Research: Corporate Rating Methodology Evaluating Corporate Governance Rating Technology Companies U.S. Leveraged Finance Spotlight -- First Data Corporation