Fitch: First Data IPO Filing a Positive Credit Development

CHICAGO--(BUSINESS WIRE)-- Fitch Ratings believes First Data Corporation's (FDC) execution of a successful initial public offering (IPO) would be a positive development for FDC's credit profile. FDC recently filed a preliminary prospectus regarding an IPO of its common stock, and indicated that the proceeds from the IPO will be used to pay down debt. At March 31, 2015, the company had $21 billion in total debt outstanding. Fitch's Issuer Default Rating (IDR) for FDC is 'B' with a Stable Outlook. See the full list of Fitch's ratings on FDC at the end of this release.

FDC did not disclose the expected proceeds from the IPO but used the standard $100 million placeholder to calculate registration fees for the filing. FDC's reduction in leverage following the debt repayment could lead to a positive rating action, once the debt reduction is completed. Fitch would consider an upgrade if the debt reduction following the offering reduces total gross leverage to 6.0x or below.

Fitch's current 'B' IDR reflects FDC's highly leveraged capital structure. As of March 31, 2015, total and secured leverage were 8.2x and 5.8x, respectively. Fitch notes that leverage has materially declined from 10.6x in 2010 as a result of debt reduction and EBITDA growth. Debt reduction was driven largely by $3.5 billion in equity private placement at First Data Holdings, Inc. (FDC's direct parent; HoldCo) in July 2014, of which $2.2 billion was used to pay down debt at FDC (excluding $214 million in call premiums).

RATING SENSITIVITIES

Positive Trigger: An explicit commitment by management to maintain leverage at or below 6x (gross leverage) could merit an upgrade consideration. Future developments that may lead to positive rating action include a greater visibility and confidence in the potential for the company to access the public equity markets with proceeds used to reduce debt outstanding.

Negative Trigger: The ratings could be downgraded if First Data were to experience erosion in its market share or if price compression accelerates due to new competitive threats leading to sustained EBITDA margins at approximately 20% or below with negative free cash flow generation.

Fitch currently rates FDC as follows:

--Senior secured revolving credit facility and term loans 'BB/RR1';

--Senior secured notes 'BB/RR1'.

--Junior secured notes 'CCC+/RR6';

--Senior unsecured notes 'CCC+/RR6';

--Senior subordinated notes 'CCC/RR6'.

The Rating Outlook is Stable.

Additional information is available at 'www.fitchratings.com'.

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

View source version on businesswire.com: http://www.businesswire.com/news/home/20150721006214/en/

Fitch Ratings
Primary Analyst
John Culver, CFA
Senior Director
+1-312-368-3216
Fitch Ratings, Inc.
70 W. Madison Street
Chicago, IL 60602
or
Secondary Analyst
Brian Yoo, CFA
Associate Director
+1-212-908-0175
or
Media Relations:
Alyssa Castelli, +1 212-908-0540
[email protected]

Source: Fitch Ratings

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