Fitch Rates FDC's Jr. Secured Notes 'CCC/RR6' & Affirms IDR at 'B'; Outlook Stable

NEW YORK--(BUSINESS WIRE)--Following the completion of First Data Corp.'s (FDC) offer to exchange $6 billion of senior unsecured notes for $3 billion of new senior unsecured notes and $3 billion of junior secured notes, Fitch Ratings has assigned the following ratings to FDC:

--$1 billion 8.75%/10% PIK Toggle junior secured notes due 2022 'CCC/RR6';

--$2 billion 8.25% junior secured notes due 2021 'CCC/RR6';

--$3 billion 12.625% senior unsecured notes due 2021 'CCC/RR6'.

FDC accepted for exchange approximately an even amount ($3 billion each) of its senior unsecured cash pay and senior unsecured PIK notes, both due 2015. Consequently, the company's debt structure as of Sept. 30, 2010 but pro forma for this exchange is as follows:

i) $11.9 billion outstanding under a secured term loan B maturing September 2014;

ii) $784 million in 9.875% senior unsecured notes maturing September 2015;

iii) $675 million in 10.55% notes maturing September 2015 with mandatory PIK interest through September 2011 and cash interest thereafter (these notes have accrued approximately $75 million in additional PIK interest prior to the exchange completion);

iv) $2.5 billion of 11.25% senior subordinated notes maturing September 2016;

v) $510 million in 8.875% senior secured notes due August 2020;

vi) $2 billion 8.25% junior secured notes due 2021;

vii) $3 billion 12.625% senior unsecured notes due 2021;

viii) $1 billion 8.75%/10% PIK Toggle junior secured notes due 2022.

Total debt outstanding as of Sept. 30, 2010 was $22.7 billion. In addition, the parent company of FDC, First Data Holdings, Inc., has outstanding $1 billion original value senior unsecured PIK notes due 2016.

In addition, Fitch has affirmed the following ratings for FDC:

--Long-term Issuer Default Rating (IDR) at 'B';

--$2 billion senior secured revolving credit facility (RCF) due 2013 at 'BB-/RR2';

--$11.9 billion senior secured term loan B due 2014 at 'BB-/RR2';

--$510 million 8.875% senior secured notes due 2020 at 'BB-/RR2';

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

--Senior subordinated notes at 'CC/RR6'.

The Rating Outlook is Stable.

Total liquidity as of Sept. 30, 2010 was solid and consisted of $442 million in cash and $1.7 billion available under a $2 billion senior secured RCF that expires September 2013. The reduced availability under the RCF partially reflects approximately $230 million which was provided by an affiliate of Lehman Brothers and is no longer available to be borrowed upon in addition to letters of credit currently outstanding. Approximately $203 million of cash is held by Bank of America Merchant Services (BAMS) and IPS (a discontinued business segment) and is not available for general corporate purposes.

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 $2.2 billion for the latest 12 months (LTM) ended Sept. 30, 2010 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 reflect Fitch's belief that 0%-10% recovery is realistic. The 'CC/RR6' rating for the subordinated notes reflects the minimal recovery prospects and inherent subordination in a recovery scenario.

For additional information on FDC, please see Fitch's 12-page full rating report dated Nov. 29, 2010 and available at www.fitchratings.com.

Additional information is available at www.fitchratings.com.

Applicable Criteria and Related Research:

--'First Data Corp.' dated Nov. 29, 2010;

--'Corporate Rating Methodology', dated Aug. 13, 2010;

--'Liquidity Considerations for Corporate Issuers', dated June 12, 2007;

--'Cash Flow Measures in Corporate Analysis', dated Oct. 12, 2005;

--'Evaluating Corporate Governance', dated Dec. 12, 2007.

Applicable Criteria and Related Research:

First Data Corp.

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=564362

Corporate Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=546646

Liquidity Considerations for Corporate Issuers

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=328666

Cash Flow Measures in Corporate Analysis

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=243758

Evaluating Corporate Governance

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=363502

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