First Data 2008 Annual Report Download - page 156

FIRST DATA CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
On September 17, 2008, the Company launched a registered exchange offer to exchange the $2.2 billion aggregate principal amount of its 9.875%
senior notes due 2015 for publicly tradable notes having substantially identical terms and guarantees, except that the exchange notes will be freely tradable.
Substantially all of the notes were exchanged effective October 21, 2008. There was no expenditure, other than professional fees incurred in connection with
the Registration Statement itself, or receipt of cash associated with this exchange.
The senior notes are unsecured and (i) rank senior in right of payment to all of the Company's existing and future subordinated indebtedness, (ii) rank
equally in right of payment to all of the existing and future senior indebtedness, (iii) are effectively subordinated in right of payment to all existing and future
secured debt to the extent of the value of the assets securing such debt, and (iv) are structurally subordinated to all obligations of each subsidiary that is not a
guarantor of the senior notes. All obligations under the senior notes are fully and unconditionally guaranteed by substantially all domestic, wholly-owned
subsidiaries of the Company, subject to certain exceptions.
9.875% Senior unsecured cash-pay notes and 10.55% Senior unsecured PIK (Payment In-Kind) notes
In conjunction with the merger in 2007, the Company entered into a $3.8 billion senior unsecured cash-pay term loan facility and a $2.8 billion senior
unsecured PIK term loan facility with terms of eight years. These facilities represented bridge financing and interest was payable based upon LIBOR plus an
applicable margin, which margin gradually increased over time subject to certain cap rates noted below. As noted above, in October 2007, $2.2 billion of the
senior unsecured cash-pay term loan facility was repaid.
In June 2008 and after negotiation with the holders of the debt, the Company entered into an agreement with the lenders which, among other things and
most significantly, amended the interest rates on the senior unsecured term loan facilities. Effective August 19, 2008, the interest rate on the cash-pay term
loan facility increased to 9.875% and the interest rate on the PIK term loan facility increased to 10.55%. The rates effective August 19, 2008 were equivalent
to the cap rates that were prescribed by the original loan agreements.
In accordance with the terms of the amended senior unsecured term loan facility, the Company exchanged substantially all of the remaining balance of
its 9.875% senior unsecured cash-pay term loan bridge loans due 2015 as well as all of its 10.55% senior unsecured PIK term loan bridge loans due 2015 for
senior unsecured cash-pay notes and senior unsecured PIK notes, respectively, in each case having substantially identical terms and guarantees with the
exception of interest payments being due semi-annually on March 31 and September 30 of each year instead of quarterly. The holders of the remaining
borrowings outstanding under the senior unsecured cash-pay term loan bridge loan may exchange, at the option of the lender, for senior unsecured cash-pay
notes on the 15th day of each calendar month subsequent to this initial Exchange Offering. There was no expenditure, other than professional fees incurred in
connection with the Exchange Offering itself, or receipt of cash associated with this exchange.
The terms of the Company's senior unsecured PIK notes require that interest on these notes up to and including September 30, 2011 be paid entirely by
increasing the principal amount of the outstanding notes or by issuing senior unsecured PIK notes. Beginning October 1, 2011, interest will be payable in cash
and the first such payment will be in March 2012. During the year ended December 31, 2008 and the successor period from September 25, 2007 through
December 31, 2007, the Company increased the principal amount of these notes by $197.4 million and $67.5 million, respectively, in accordance with this
provision and an additional $85.7 million was accrued at December 31, 2008 which will be rolled into principal as of the next interest payment date in March
of 2009.
The senior cash-pay notes and senior PIK notes are unsecured and (i) rank senior in right of payment to all of the Company's existing and future
subordinated indebtedness, (ii) rank equally in right of payment to all of the existing and future senior indebtedness, (iii) are effectively subordinated in right
of payment to all existing and future secured debt to the extent of the value of the assets securing such debt, and (iv) are structurally
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