iPayment signs amended refinancing agreement with 9˝% noteholders

By Marisa Wong

Morgantown, W.Va., Feb. 3 – iPayment, Inc. and its parent, iPayment Holdings, Inc., announced signing of an amended agreement for a comprehensive refinancing with holders of about 90% of the company’s outstanding 9˝% senior secured notes due 2019. These noteholders also hold about 57% of the parent company’s common stock.

Earlier this week, the company announced a revised refinancing offer from holders of about 82% of the 9˝% notes. Before that, iPayment had signed a refinancing agreement with holders of roughly 79% of the 9˝% notes, as reported on Jan. 17.

iPayment said the refinancing, once completed, would result in a substantial deleveraging of the company and would enable it to materially expand its services and product offerings. The refinancing is expected to close in the first quarter.

Chief executive officer OB Rawls IV said in a Friday press release, “We remain on target for a close in the first quarter, which will stimulate our ability to aggressively grow our business through new and existing business channels.”

The refinancing is subject to a number of conditions, including obtaining a new credit facility to be arranged by JPMorgan. Many of these conditions are beyond its control, iPayment said.

Under the terms of the latest amended agreement with the debt and equity holders, the company intends to launch an exchange offer. Holders of the 9˝% notes would have the opportunity to exchange their notes for a pro rata portion of the following:

• A $40.0 million cash payment from iPayment;

• Cash in amount equal to accrued interest;

• For those noteholders meeting an early tender deadline, an additional cash payment of $1 million;

• 90.5% of a new issue of preferred stock of the parent company; and

• 90.5% of the common stock of the parent company.

In connection with the refinancing transactions, each existing holder of iPayment Holdings common stock will have either of the following options:

• Receive a cash payment in exchange for 100% of that holder’s common stock, determined based on a notional $36 million equity value; or

• Maintain their ownership of iPayment Holdings common stock (which will be diluted to 9.5% of the aggregate outstanding common stock) and receive a distribution of a pro rata portion of 9.5% of the new issue of preferred stock.

Noteholders that hold existing iPayment Holdings common stock and participate in the exchange offer will be required to waive the right to tender their existing common stock and to receive the cash payment in exchange for their existing common stock.

The amended refinancing agreement reduces the cash payments payable to noteholders that participate in the exchange offer by an aggregate of $4 million; increases the notional equity value for iPayment Holdings by $11 million, resulting in an increased cash payment to existing holders of iPayment Holdings common stock who elect to receive cash in exchange for their common stock; and increases the percentage of the common stock retained by and preferred stock issued to existing holders of iPayment Holdings common stock.

The company said that as part of the refinancing it expects to enter into one or more new credit agreements to be arranged exclusively by JPMorgan.

In addition, the company would also repay the obligations outstanding under its existing credit agreement and some other debt and amend the existing indenture governing the 9˝% notes, as well as to make changes to the parent company’s certificate of incorporation, bylaws and existing investor rights agreement. The debt and equity holders entering into the amended refinancing agreement have agreed to vote all shares of their common stock in favor of those amendments, the release noted.

iPayment is a New York-based provider of credit and debit card payment processing services to small merchants.

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