First Data 2010 Annual Report Download - page 15

Table of Contents
ITEM 1A. RISK FACTORS
The following are certain risks that could affect the Company's business and its results of operations. The risks identified below are not all
encompassing but should be considered in establishing an opinion of the Company's future operations.
The Company's substantial leverage could adversely affect its ability to raise additional capital to fund its operations, limit the Company's ability to react
to changes in the economy or its industry, expose the Company to interest rate risk to the extent of its variable rate debt and prevent the Company from
meeting its debt obligations.
The Company is highly leveraged. The Company's high degree of leverage could have important consequences, including:
• increasing the Company's vulnerability to adverse economic, industry or competitive developments;
• requiring a substantial portion of cash flow from operations to be dedicated to the payment of principal and interest on the Company's
indebtedness, therefore reducing the Company's ability to use its cash flow to fund the Company's operations, capital expenditures and future
business opportunities;
• exposing the Company to the risk of increased interest rates because certain of its borrowings, including and most significantly borrowings under
the Company's senior secured credit facilities, are at variable rates of interest;
• making it more difficult for the Company to satisfy its obligations with respect to its indebtedness, and any failure to comply with the obligations
of any of the Company's debt instruments, including restrictive covenants and borrowing conditions, could result in an event of default under the
indenture governing the notes and the agreements governing such other indebtedness;
• restricting the Company from making strategic acquisitions or causing the Company to make non-strategic divestitures;
• making it more difficult for the Company to obtain network sponsorship and clearing services from financial institutions;
• limiting the Company's ability to obtain additional financing for working capital, capital expenditures, product development, debt service
requirements, acquisitions and general corporate or other purposes; and
• limiting the Company's flexibility in planning for, or reacting to, changes in the Company's business or market conditions and placing the
Company at a competitive disadvantage compared to its competitors who are less highly leveraged and who, therefore, may be able to take
advantage of opportunities that the Company's leverage prevents it from exploiting.
A substantial amount of this indebtedness consists of the Company's indebtedness under its senior secured term loan facility which matures in
September 2014. The Company's senior secured revolving credit facility matures in September 2013. The Company may not be able to refinance its senior
secured credit facilities or its other existing indebtedness because of the Company's high level of debt, debt incurrence restrictions under its debt agreements
or because of adverse conditions in credit markets generally.
Despite the Company's high indebtedness level, the Company and its subsidiaries still may be able to incur significant additional amounts of debt, which
could further exacerbate the risks associated with the Company's substantial indebtedness.
The Company and its subsidiaries may be able to incur substantial additional indebtedness in the future. Although the indentures governing the
Company's senior secured notes, senior second lien notes, senior notes, PIK toggle senior second lien notes, and senior subordinated notes; the senior PIK
notes of First Data Holdings Inc.; and the Company's senior secured credit facilities contain restrictions on the incurrence of additional indebtedness, these
restrictions are subject to a number of significant qualifications and exceptions, and under certain circumstances, the amount of indebtedness that could be
incurred in compliance with these restrictions could be substantial. If new debt is added to the Company's and its subsidiaries' existing debt levels, the related
risks that the Company will face would increase.
Global economics, political and other conditions may adversely affect trends in consumer spending, which may adversely impact the Company's revenue
and profitability.
The global electronic payments industry depends heavily upon the overall level of consumer, business and government spending. A sustained
deterioration in the general economic conditions, particularly in the United States or Europe, or increases in interest rates in key countries in which the
Company operates may adversely affect the Company's financial performance by reducing the number or average purchase amount of transactions involving
payment cards. A reduction in the amount of consumer spending could result in a decrease of the Company's revenue and profits.
A weakening in the economy could also force some retailers to close resulting in exposure to potential credit losses and transaction declines and the
Company earning less on transactions due also to a potential shift to large discount merchants. Additionally, credit card issuers may reduce credit limits and
be more selective with regard to whom they issue credit cards. Changes in economic conditions could adversely impact future revenues and profits of the
Company and result in a downgrade of its debt ratings which may lead to termination or modification of certain contracts and make it more difficult for the
Company to obtain new business.
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