Compromise Appears to Save First Data Deal
NEW YORK -- A compromise between the firm set to purchase First Data Corp. and the banks that are committed to financing the sale appears to have paved the way for it going forward.
Wall Street analysts had been concerned whether pressures brought to bear by the tighter credit market might undercut the deal and call it off, but The Wall Street Journal has reported that KKR agreed to introduce performance measurements into the deal that it is using to finance the move.
Under the terms of the performance, the paper reported, KKR agreed that First Data will have to keep earnings at a certain ratio to its debt. But the private equity giant was able to resist demands from the bankers that it increase the interest rate on the money it was borrowing.
The paper reported that the banks sought the changes because they, in turn, will seek to sell parts of their debt as investments on the market. Investors made nervous by rapid market swings and the ongoing credit crunch were considered too skittish to purchase the debt without some concessions.
An estimated 500-1,000 credit unions process their card transactions on the First Data platform.
However, it remains unclear whether the banks will be able to sell off parts of their finance debt at the prices they would currently like. The paper quoted one bank analyst as suggesting that nervous investors would remain on the sidelines until the banks drop their prices to those the investors find more attractive.