Visa 2013 Annual Report Download - page 56

Credit Ratings
At September 30, 2013, 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 2013, however, we were only required to fund
settlement-related working capital on a few days, including a peak net settlement receivable balance of
$36 million. Our average daily net settlement position was a payable of $198 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. Under the settlement agreement, if class members opt out of the damages portion of the
class settlement, defendants are entitled to receive takedown payments of no more than 25% of the
original cash payments made into the settlement fund, based on the percentage of payment card sales
volume for a defined period attributable to merchants who opted out. See Note 20—Legal Matters to
our consolidated financial statements. Upon final court approval of the settlement agreement, Visa’s
portion of the takedown payments, calculated to be $1.1 billion, will increase our current taxable
income. The resulting increase in our current taxable income will increase our deferred tax asset and
income tax payable by $387 million, which will have a negative impact on our free cash flow in the year
the final court approval is rendered. See Note 19—Income Taxes to our consolidated financial
statements. At September 30, 2013, the litigation escrow account had an available balance of
$49 million. See Note 3—Retrospective Responsibility Plan to our consolidated financial statements.
Other litigation. Judgments in and settlements of litigation, other than the covered litigation, could
give rise to future liquidity needs.
Reduction in as-converted shares. During fiscal 2013, we repurchased 33 million shares of our
class A common stock using $5.4 billion of operating cash on hand. At September 30, 2013, we had
$251 million of remaining funds available for share repurchases under the current program authorized
by the board of directors. In October 2013, our board of directors authorized an additional $5.0 billion
share repurchase program. See Note 14—Stockholders’ Equity to our consolidated financial
statements.
48