Visa 2014 Annual Report Download - page 66

Litigation escrow account. Pursuant to the terms of the retrospective responsibility plan, we
maintain a litigation escrow account from which monetary liabilities from settlements of, or judgments
in, the covered litigation will be payable. When we fund the litigation escrow account, the shares of
class B common stock held by our stockholders are subject to dilution through an adjustment to the
conversion rate of the shares of class B common stock to shares of class A common stock. See Note
3—Retrospective Responsibility Plan and Note 20—Legal Matters to our consolidated financial
statements. The balance in this account at September 30, 2014, was $1.5 billion and is reflected as
restricted cash in our consolidated balance sheet. As these funds are restricted for the sole purpose of
making payments related to the covered litigation matters, as described below under Uses of Liquidity,
we do not rely on them for other operational needs.
Credit Ratings
At September 30, 2014, our credit ratings by Standard and Poor’s and Moody’s were as follows:
Standard and Poor’s Moody’s
Debt type Rating Outlook Rating Outlook
Short-term unsecured debt ...................... A-1 Stable P-1 Stable
Long-term unsecured debt ...................... A+ Stable A1 Stable
Various factors affect our credit ratings, including changes in our operating performance, the
economic environment, conditions in the electronic payment industry, our financial position and
changes in our business strategy. We do not currently foresee any reasonable circumstances under
which our credit ratings would be significantly downgraded. If a downgrade were to occur, it could
adversely impact, among other things, our future borrowing costs and access to capital markets.
Uses of Liquidity
Payments settlement. Payments settlement due from and to our financial institution clients can
represent a substantial daily liquidity requirement. U.S. dollar settlements are typically settled within the
same day and do not result in a net receivable or payable balance, while settlement currencies other
than the U.S. dollar generally remain outstanding for one to two business days, which is consistent with
industry practice for such transactions. During fiscal 2014, we were not required to fund settlement-
related working capital. Our average daily net settlement position was a payable of $261 million.
Covered litigation. We are parties to legal and regulatory proceedings with respect to a variety of
matters, including certain litigation that we refer to as the covered litigation. As noted above, monetary
liabilities from settlements of, or judgments in, the covered litigation are payable from the litigation
escrow account. During fiscal 2013, we made $4.4 billion in covered litigation payments that were
funded from the litigation escrow account, of which, $4.0 billion was paid into a settlement fund
established pursuant to the definitive class settlement agreement in the interchange multidistrict
litigation. On January 14, 2014, the court entered the final judgment order approving the settlement
with the class plaintiffs, which is subject to the adjudication of any appeals. Certain merchants in the
settlement classes, however, have objected to the settlement and a number of merchants have filed
opt-out claims. Takedown payments of approximately $1.1 billion related to the opt-out merchants was
received in January 2014, and deposited into the litigation escrow account. Receipt of the takedown
payments increases our current taxable income by approximately $1.1 billion, and income tax payable
by about $368 million, which was fully paid by the end of fiscal 2014. At September 30, 2014, the
litigation escrow account had an available balance of $1.5 billion. See Note 3—Retrospective
Responsibility Plan and Note 20—Legal Matters to our consolidated financial statements.
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