First Data 2009 Annual Report Download - page 75

FIRST DATA CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
During 2009, 2008 and the 2007 successor period, the principal amount of the Company’s senior PIK
(Payment In-Kind) notes increased by $333.0 million, $197.4 million and $67.5 million, respectively, resulting
from the “payment” of accrued interest expense. Beginning October 1, 2011, the interest on the PIK term loan
facility will be required to be paid in cash and the first such payment will be due in March 2012.
During the years ended December 31, 2009 and 2008, the Company entered into capital leases totaling
approximately $105 million and $89 million, respectively. Capital leases into which the Company entered during
the successor and predecessor periods in 2007 were immaterial.
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 are 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.
In accordance with the terms of the amended senior unsecured term loan and senior subordinated unsecured
term loan facilities and in September 2008, 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 and 11.25% senior subordinated unsecured term loan bridge
loans due 2016 for senior notes, senior PIK notes and senior subordinated 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. In March 2009, the remaining balance of its
9.875% senior unsecured cash-pay term loan bridge loans due 2015 that was not previously exchanged was
exchanged for senior notes identical to those described above. There was no expenditure, other than professional
fees incurred in connection with the Exchange Offering itself, or receipt of cash associated with this exchange.
On August 10, 2009, the Company launched a registered exchange offer to exchange aggregate principal
amounts of $3.2 billion of its 10.55% senior PIK notes, $2.5 billion of its 11.25% senior subordinated notes and
$1.6 billion of its 9.875% senior notes (which constituted all such notes outstanding at that date) for publicly
tradable notes having substantially identical terms and guarantees, except that the exchange notes are freely
tradable. Substantially all of the notes were exchanged effective September 9, 2009. There was no expenditure,
other than professional fees incurred in connection with the Registration Statement itself, or receipt of cash
associated with this exchange.
On November 1, 2008, the Company and JPMorgan Chase terminated their merchant alliance, CPS, which
was the Company’s largest merchant alliance. The Company received its proportionate 49% share of the assets of
the alliance, including domestic merchant contracts, an equity investment in Merchant Link, a full-service ISO
and Agent Bank unit, and a portion of the employees. The receipt of the Company’s proportionate share of CPS
was accounted for as a business combination and was a non-cash transaction.
Significant non-cash transactions during the 2007 predecessor period included the grant of approximately
3.7 million shares of restricted stock to certain employees.
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
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