iPayment inks deal with 9½% noteholders on comprehensive refinancing

By Caroline Salls

Pittsburgh, Jan. 17 – iPayment Inc. and its iPayment Holdings, Inc. parent signed an agreement for a comprehensive refinancing of iPayment with the holders of roughly 79% of the company’s outstanding 9½% senior secured notes due 2019, according to a news release.

The senior secured noteholders also hold about 41% of the holding company’s common stock.

iPayment said the refinancing would result in a substantial deleveraging of the company and would enable it to significantly expand its services and product offerings.

The refinancing is expected to close in the first quarter.

Refinancing benefits

“This agreement is an important milestone for iPayment and reflects the strong confidence and support for our business that iPayment’s significant stakeholders continue to demonstrate,” chief executive officer OB Rawls IV said in the release.

“When this refinancing is completed later this quarter, we will be well positioned to aggressively expand our channel sales initiatives, both in the traditional agent/ISO space and in new, integrated verticals, and make significant investments in new technologies and infrastructure to support existing and new partners.”

Chief financial officer Robert Purcell said the proposed refinancing would cut the company’s total debt by about $185 million, reduce its cost of debt and improve annual cash flow by more than $15 million.

The refinancing is subject to a number of conditions, including obtaining a new credit facility to be arranged by J.P. Morgan.

Agreement terms

Under the agreement, iPayment said it intends to launch an exchange offer in which the noteholders will have the opportunity to exchange their 9½% notes for a share of a $42.5 million cash payment from iPayment, cash in amount equal to unpaid interest, 91% of a new issue of preferred stock in the holding company and 91% of the holding company’s common stock.

In addition, noteholders meeting an early tender deadline will receive a share of an additional $2.5 million cash payment.

In connection with the refinancing transactions, existing holders of iPayment Holdings’ common stock will have the option to either receive a cash payment in exchange for 100% of such the holder’s common stock, determined based on a $25 million equity value for the holding company, or maintain their ownership of the iPayment Holdings common stock and receive a distribution of a share of 9% of the new holding company preferred stock.

To the extent the cash option is elected by the equityholders, the company said the percentages of the preferred stock and the common stock to be received by the tendering noteholders and by non-electing holders of common stock in the exchange offer will be correspondingly increased.

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 debt and equityholders entering into the agreement will vote all of their shares of holding company common stock in favor of related amendments.

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

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