First Data to see interest payments decrease to $1.6 billion in 2013

By Aleesia Forni

Columbus, Ohio, Feb. 1 - First Data Corp. expects cash interest payments to decline to $1.6 billion in 2013 from a projected $1.7 billion for 2012, due to new interest rate swap contracts.

"This benefit, along with growth in EBITDA over the next two years, will provide improved cash coverage as we look to address upcoming maturities," chief financial officer Ray Winborne said during the company's fourth-quarter 2011 earnings conference call on Wednesday.

First Data has forward-starting step up swaps on $5 billion of term loans that will replace existing swaps expiring in September on $5 billion of term loans. The old swaps have an average fixed rate of "almost 5%," Winborne said, adding that this "is well above current Libor rates."

The new swaps run for four years and start at 59 basis points in the fourth quarter of 2012 and step up from there, giving a weighted average fixed rate of 1.3%.

First Data will save $160 million in cash interest payments in 2013 from the transactions.

Since third-quarter 2010, the company has reduced debt maturing between 2014 and 2015 by $12 billion.

Additionally, First Data completed a $1 billion extension on its revolver from 2013 to 2016.

These actions have given the company "a lot of flexibility" with regards to prioritizing its upcoming debt maturities, and First Data has no "significant" debt maturities until September 2014.

"Clearly, we're looking at the nearest maturity in 2014, but there's no preference on how we go about that," Winborne said.

"We're looking at all the options, and we think we've got the flexibility to balance the market conditions, what interest cost we think we'll have to take on depending on which tranche we look at there, as well as the improving company performance."

First Data generated $1.1 billion in operating cash flow for 2011 and ended the quarter with $1.7 billion in unrestricted liquidity.

Adjusted EBITDA increased to $655 million from $564 million in the fourth quarter of 2010, driven by cost reductions and revenue growth.

"First data generates significant EBITDA and cash flow," Winborne said.

"We have no covenant issues, and we have plenty of headroom on our only financial covenant, which is the ratio of consolidated senior secured debt to consolidated EBITDA."

The company's current ratio is 4.3x, which is "comfortably under" the covenants' requirement of 6.5x.

First Data is an Atlanta-based electronic payment processor.

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