First Data 2007 Annual Report Download - page 69

FIRST DATA CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
The senior subordinated unsecured credit facility contains certain mandatory redemption requirements. Voluntary repayments are allowed and are
subject to certain costs.
Guarantees and Covenants
All obligations under the senior secured revolving credit facility and senior secured term loan facility are unconditionally guaranteed by substantially all
existing and future, direct and indirect, wholly owned, material domestic subsidiaries of the Company other than Integrated Payment Systems Inc. The senior
secured facilities contain a number of covenants that, among other things, restrict the Company's ability to incur additional indebtedness, create liens, enter
into sale and leaseback transactions, engage in mergers or consolidations, sell or transfer assets, pay dividends and distributions or repurchase the Company's
capital stock, make investments, loans or advances, prepay certain indebtedness, make certain acquisitions, engage in certain transactions with affiliates,
amend material agreements governing certain indebtedness and change its lines of business. The senior secured facilities also require the Company to
maintain a maximum senior secured leverage ratio and contain certain customary affirmative covenants and events of default, including a change of control
beginning at the one year anniversary of debt issuance. The Company is in compliance with all applicable covenants as of December 31, 2007.
All obligations under the senior notes, senior unsecured term loan facilities and senior subordinated unsecured term loan facility are similarly
guaranteed on a subordinated basis in accordance with their terms by each of the Company's domestic subsidiaries that guarantee obligations under the
Company's senior secured term loan facility described above. These notes and facilities also contain a number of covenants similar to those described for the
senior secured term loan facility noted above. The Company is in compliance with all applicable covenants as of December 31, 2007.
Covenant Compliance
Under the credit and term loan facilities and the associated indentures, certain limitations, restrictions and defaults could occur if the Company is not
able to satisfy and remain in compliance with specified financial ratios. Under the senior secured term loan facility, the Company has agreed it will not permit
the Consolidated Senior Secured Debt to Consolidated EBITDA (both as defined in the agreement) Ratio for any 12 month period (last four fiscal quarters)
ending during a period set forth below to be greater than the ratio set forth below opposite such period:
Period Ratio
October 1, 2008 to September 30, 2009 7.25 to 1.00
October 1, 2009 to September 30, 2010 7.00 to 1.00
October 1, 2010 to September 30, 2011 6.75 to 1.00
October 1, 2011 to September 30, 2012 6.50 to 1.00
October 1, 2012 to September 30, 2013 6.25 to 1.00
Thereafter 6.00 to 1.00
Until October 1, 2008, if the Company doesn't maintain a Consolidated Total Debt to Consolidated EBITDA (both as defined in the agreement) Ratio
not greater than 8.75 to 1.00, it shall become subject to certain limitations and restrictions. As of December 31, 2007 the Company is in compliance with this
measure.
Consolidated EBITDA (as defined in the agreements) is used to determine the Company's compliance with certain covenants in the senior secured
revolving credit facility, senior secured term loan facility, senior unsecured cash-pay term loan facility, senior unsecured PIK term loan facility, senior
subordinated unsecured term loan facility and one or more indentures related thereto. EBITDA is calculated by reference to income (loss) from continuing
operations plus interest and other financing costs, net, provision for income taxes, and depreciation and amortization. Consolidated EBITDA as defined in the
agreements (also referred to as debt covenant EBITDA) is calculated by adjusting EBITDA to exclude unusual items and other adjustments permitted in
calculating covenant compliance under the indentures and the credit facilities. We believe that the inclusion of supplementary adjustments to EBITDA applied
in presenting Consolidated EBITDA are appropriate to provide additional information to investors to demonstrate compliance with our financing covenants.
The breach of covenants in the senior secured term loan facility that are tied to ratios based on Consolidated EBITDA beginning October 1, 2008 could
result in a default under that agreement and the lenders could elect to declare all amounts borrowed due and payable. Any such acceleration would also result
in a default under the indentures. Additionally, under the debt agreements, the Company's ability to engage in activities such as incurring additional
indebtedness, making investments and paying dividends is also tied to ratios based on Consolidated EBITDA.
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