Moody's affirms First Data

Moody's Investors Service said it affirmed First Data Corp.'s A2 senior unsecured debt rating and revised the outlook to stable from negative.

The agency said the outlook revision reflects the expected debt allocation to The Western Union Co. in connection with that company's upcoming spinoff from First Data on Sept. 29 and First Data's debt retention. At the time of the spinoff, Western Union will distribute $3.5 billion to First Data in the form of a $2.5 billion cash distribution and a $1 billion 10-year Western Union note. First Data plans to apply the $1 billion note in a debt-for-debt exchange between First Data and certain investment banks for debt of First Data. Pro forma for the spinoff, First Data's adjusted net debt will be about $2.6 billion.

Moody's said the ratings reflect First Data's leading merchant processing market position, strong cash flow of around $1.6 billion, the strong recurring revenues generated from its processing fees and card servicing businesses and the company's demonstrated willingness to limit financial leverage.

The ratings also take into consideration the company's client concentration from large financial institutions within its card issuing business, ongoing competition from in-house alternatives and third-party rivals and an adverse pricing mix from large domestic merchant processing accounts, the agency said.

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