First Data 2008 Annual Report Download - page 157

FIRST DATA CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
subordinated to all obligations of each subsidiary that is not a guarantor of the senior notes. All obligations under the senior cash-pay notes and senior PIK
notes are fully and unconditionally guaranteed by substantially all domestic, wholly-owned subsidiaries of the Company, subject to certain exceptions.
11.25% Senior subordinated unsecured notes
In conjunction with the merger in 2007, the Company entered into a senior subordinated unsecured term loan facility of $2.5 billion with a term of nine
years. This facility 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.
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 subordinated unsecured term loan facility. Effective August 19, 2008, the interest rate increased to
11.25%. The rate effective August 19, 2008 was equivalent to the cap rate that was prescribed by the original loan agreement.
In accordance with the terms of the amended senior subordinated unsecured term loan facility, the Company exchanged all of its 11.25% senior
subordinated unsecured term loan bridge loans due 2016 for senior subordinated unsecured notes 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. 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 senior subordinated notes are unsecured and (i) rank equally in right of payment with all of the existing and future senior subordinated debt,
(ii) rank senior in right of payment to all future debt and other obligations that are, by their terms, expressly subordinated in right of payment to the senior
subordinated notes. (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 subordinated notes. All obligations
under the senior subordinated notes are fully and unconditionally guaranteed by substantially all domestic, wholly-owned subsidiaries of the Company,
subject to certain exceptions.
Debt Fees
Fees totaling $555.0 million associated with the debt issued in the merger were capitalized in 2007 as deferred financing costs. The fees included
amounts related to the bridge financing facilities as well as fees incurred upon the issuance of the $2.2 billion of senior notes.
In June 2008, the Company incurred fees totaling $102.4 million in connection with a modification of the bridge facilities (see descriptions of impact of
modifications above) which were capitalized as deferred financing costs. They are payable in three equal annual installments starting August 19, 2008. These
fees replaced higher underwriting fees that otherwise would have been payable when the bridge facilities were refinanced. No additional fees were paid upon
the exchange of the bridge loans to notes described above.
The deferred financing costs are being amortized on a straight-line basis, which approximates the interest method, over the term of the respective debt,
with a weighted-average period of 8 years. Deferred financing costs are reported in the "Other long-term assets" line of the Consolidated Balance Sheets.
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
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