(Adds KKR co-CEO quote, details on First Data)
By Greg Roumeliotis
NEW YORK, June 19 (Reuters) - 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 buyouts.
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 “transformation.”
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 billion.
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 company’s board.
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 financial institutions. (Editing by Jeffrey Benkoe)