(Adds KKR co-CEO quote, details on First Data)
By Greg Roumeliotis
NEW YORK, June 19 First Data Corp will receive a
$3.5 billion injection from existing and new investors, it said
on Thursday, as its private equity owner, KKR & Co LP, tries to
offer debt relief to the one of the world's largest leveraged
The investment, in the form of a private equity placement,
is the most dramatic move yet by KKR. It frees some of
First Data's cash flow from the debt burden it took on as the
result of its $29 billion leveraged buyout in 2007.
The big payment processor has been stifled by interest
payments, generating a loss of $732.2 million in the 12 months
to the end of March, as most of its cash flow went to service
its net debt of $24.3 billion.
First Data said it will receive $1.5 billion from existing
investors and $2 billion from new investors that include unnamed
pension funds, mutual funds, asset managers and wealthy
individuals. KKR provided about $1.2 billion, including $500
million from its 2006 private equity fund and $700 million from
its own balance sheet.
KKR and a group of banks including Goldman Sachs Group Inc
and Citigroup Inc had committed $7.2 billion to the
2007 leveraged buyout, according to regulatory filings. KKR had
its investment in First Data marked at 81 cents on the dollar as
of the end of March 2014.
Frank Bisignano, the former co-chief operating officer of
JPMorgan Chase & Co that KKR brought in last year to
lead First Data, said the new investment would unlock $375
million annually to help accelerate the company's
Since Bisignano joined, First Data said it had strengthened
its capital structure, extended equity to all employees,
launched new products and embarked on strategic partnerships.
First Data has considered other ways to slash debt. Reuters
reported last year the company explored selling its financial
services business, which it hoped would raise as much as $5
To manage its debt mountain, First Data has extended $24.5
billion in debt maturities since 2010.
First Data's adjusted earnings before interest, taxes,
depreciation and amortization rose to $613.5 million in the
first quarter from $520.4 million the year before. Further
growth without the crushing effect of debt could allow the
company to explore an initial public offering (IPO).
"This investment will help the company supercharge on what
it is already doing," KKR co-founder and co-Chief Executive
Officer Henry Kravis said in a telephone interview, declining to
comment on any plans for an IPO of First Data. He sits on the
First Data is one of many corporate cleanups quietly
underway in the world of private equity, as the industry deals
with a debt binge in the years before the 2008 financial crisis.
The Atlanta-based company offers such services as
processing debt and credit card payments for merchants and
(Editing by Jeffrey Benkoe)