First Data 2007 Annual Report Download - page 67

FIRST DATA CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Senior Secured Revolving Credit Facility and Senior Secured Term Loan Facility
The Company entered into a $2.0 billion senior secured revolving credit facility with a term of six years. The Company drew $200.0 million against the
senior secured revolving credit facility at the time of the merger and $60 million was outstanding at December 31, 2007. The Company also entered into a
$13.0 billion senior secured term loan facility with a term of seven years. At the merger date, the Company drew $11,775 million in the form of a U.S. dollar
denominated loan and $1,000 million in the form of a euro denominated loan (709.2 million euro). The remainder, $225 million, was available in the form of
a delayed draw term loan facility in an amount approximately equal to existing notes remaining outstanding after the tender offers described above were
completed. The delayed draw term loan facility may be drawn as the remaining notes are repaid (of which approximately $26 million was drawn in December
2007 when existing notes were repaid).
Interest is payable at a rate equal to, at the Company's option, either (a) LIBOR for deposits in the applicable currency plus an applicable margin or
(b) the higher of (1) the prime rate of Credit Suisse and (2) the federal funds effective rate plus 0.50%, plus an applicable margin. The Company, however,
made an irrevocable election to pay interest for the senior secured term loan facility solely under option (a). In combination with the debt issuance, the
Company designated as accounting hedges two five-year interest rate swaps related to the senior secured term loan facility with notional amounts of $2.0
billion and $1.0 billion to receive interest at variable rates equal to LIBOR and pay interest at fixed rates of 4.978% and 5.2475%, respectively. In addition,
the Company entered into interest rate swaps during the successor period with an aggregate notional value of $4.5 billion to receive interest at variable rates
equal to LIBOR and pay interest at fixed rates from 3.8665% to 4.924%.
The interest rate margin noted above may be reduced subject to the Company attaining certain leverage ratios. In addition to paying interest on the
outstanding principal amounts, the Company is required to pay commitment fees for the unutilized commitments. The initial commitment fee rates are
0.50% per year for the senior secured revolving credit facility and 0.75% per year on the delayed draw portion of the senior secured term loan facility. The
commitment fee rate related to the senior secured revolving credit facility may be reduced subject to the Company reducing its leverage to specified ratios.
The Company is required to pay equal quarterly installments in aggregate annual amounts equal to 1% of the original funded principal amount of the
senior secured term loan facility, with the balance being payable on the final maturity date. Principal amounts outstanding under the senior secured revolving
credit facility are due and payable in full at maturity. In December 2007, the Company paid approximately $32 million for both the U.S. dollar and euro-
denominated term loans related to this provision.
The senior secured credit facilities require the Company to prepay outstanding term loans, subject to certain exceptions, with:
• 50% of the Company's annual excess cash flow (which percentage will be reduced to 25% if the Company's total leverage ratio is 7.0x or less and
0% if the Company's total leverage ratio is 6.0x or less);
• 100% of the net cash proceeds of all non-ordinary course asset sales or other dispositions of property, subject to the Company's right to reinvest
the proceeds; and
• 100% of the net cash proceeds of any incurrence of debt, other than proceeds from the debt permitted under the senior secured credit facilities.
A portion of the senior secured term loan facility is subject to prepayment penalties on any mandatory repayments (other than mandatory prepayments
arising from excess cash flow). These prepayment penalties vary from 1% to 3% depending on the timing and class of the term loan facility. The Company
may prepay outstanding loans under the senior secured revolving credit facility at any time.
Senior Notes
On October 24, 2007, the Company issued $2.2 billion aggregate principal amount of 9.875% senior notes due 2015, the net proceeds of which,
together with cash on hand for the underwriting fees paid in connection with such sale, were used to repay $2.2 billion of the senior unsecured cash-pay term
loan facility (described below). The senior notes are unsecured and rank senior in right of payment with all of the Company's existing and future subordinated
indebtedness. The senior notes rank equally in right of payment with all of the existing and future senior indebtedness, including under the senior unsecured
interim credit facilities. The senior note guarantees are unsecured and rank senior in right of payment to all existing and future subordinated indebtedness of
the Company's guarantor subsidiaries and its senior subordinated unsecured interim credit facility. The senior note guarantees rank equally in right of payment
with all existing and future senior indebtedness of the guarantor subsidiaries, including their guarantees under the senior unsecured interim credit facilities.
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