Visa 2015 Annual Report Download - page 64

of class B common stock held by our stockholders are subject to dilution through an adjustment to the
conversion rate of the shares of class B common stock to shares of class A common stock. See Note
3—U.S. Retrospective Responsibility Plan and Potential Visa Europe Liabilities and Note 20—Legal
Matters to our consolidated financial statements. The balance in this account at September 30, 2015,
was $1.1 billion and is reflected as restricted cash in our consolidated balance sheet. As these funds
are restricted for the sole purpose of making payments related to the U.S. covered litigation matters, as
described below under Uses of Liquidity, we do not rely on them for other operational needs.
Credit Ratings
At September 30, 2015, 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 in 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 2015, we were not required to fund settlement-
related working capital. Our average daily net settlement position was a payable of $272 million.
Visa Europe acquisition. On November 2, 2015, we entered into a transaction agreement to
acquire Visa Europe for a total purchase price of up to €21.2 billion. The purchase price consists of:
(a) at the closing of the transaction, up-front cash consideration of €11.5 billion and preferred stock
convertible upon certain conditions into class A common stock or class A equivalent preferred stock,
valued at approximately €5.0 billion, and (b) following the end of sixteen fiscal quarters post-closing,
contingent cash consideration of up to €4.0 billion (plus up to an additional €0.7 billion in interest),
determined based on the achievement of specified net revenue levels during such post-closing period.
Closing is subject to regulatory approvals and other customary conditions, and is currently expected to
occur in the fiscal third quarter of 2016. See Note 2—Visa Europe to our consolidated financial
statements.
We also signed an option amendment, which amended the terms of the Visa Europe put option
agreement to reflect the terms of the transaction agreement. If the acquisition of Visa Europe, as
described above, is not completed, the put option will revert to its original, unamended form. The
unamended put option agreement, if exercised, would require us to purchase all of the outstanding
shares of capital stock of Visa Europe from its members. If the acquisition does not close and the put
option reverts to its unamended terms, Visa Europe may exercise the unamended put option at any
time thereafter. The unamended put option agreement provides a formula for determining the purchase
price of the Visa Europe shares, which, subject to certain adjustments, applies Visa Inc.’s forward
price-to-earnings multiple (as defined in the unamended option agreement), or the P/E ratio, at the time
the unamended option is exercised, to Visa Europe’s adjusted net income for the forward 12-month
period (as defined in the unamended option agreement), or the adjusted sustainable income. The
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