KKR will pump USD 1.2bn into First Data, the loss-making credit card processor that it bought out in 2007, as part of a USD 3.5bn private placement drive to strengthen the company’s balance sheet, it has been announced.
The private equity fund paid USD 26bn to take over the struggling company, making it one of the biggest buyouts of all time. But First Data brought with it a sizeable debt load, which KKR tried to ease through refinancing. Having failed to make a profit since 2008 – even reporting losses of up to $1bn in some cases – the company has become something of an albatross around KKR’s neck, according to the Wall Street Journal.
First Data’s losses have recently begun to decrease and the company celebrated a string of successes following last year’s appointment of Chairman and CEO, Frank Bisignano. “We have taken full advantage of the last 12 months to strengthen our company through a total focus on serving our clients and bringing them new innovations that help them grow their business,” Bisignano said. “The enthusiastic response to our strategic vision and the resulting USD 3.5 billion investment in the future of First Data, demonstrates confidence in the strategy on which we’ve embarked and validates the outstanding work of our 23,000 employee-shareholders. The new investment will unlock USD 375 million per year to help us accelerate our transformation.”
Despite the improved outlook, it is thought that KKR is still struggling to sell on the company, with the unusual finance route intended to strengthen First Data’s balance sheet and make it more attractive to potential buyers. Announcing the decision, Henry Kravis, Co-Chief Executive Officer and Co-Chairman of KKR, said: “We are pleased to be joined by several investors who saw, as we do, that Frank’s team is able to successfully combine First Data’s existing unique assets with cutting-edge technology that we believe will take the company to the next level in the months and years ahead.”
“Over the last year, the company has made great strides to solidify its role as a provider of solutions to its clients who span the globe.”
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