iPayment announces revised refinancing offer from 9½% noteholders

By Wendy Van Sickle

Columbus, Ohio, Jan. 30 – iPayment Inc. received a revised offer for a comprehensive refinancing from holders of about 82% of the company's outstanding 99½% senior secured notes due 2019, who also hold about 46% of the company’s common stock, according to a press release.

As reported on Jan. 17 iPayment signed an agreement for a comprehensive refinancing with the holders of roughly 79% of the 9½% notes who held about 41% of the 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 revised offer reduces the cash payments payable to noteholders who participate in the exchange offer by $4 million and increases the notional equity value for parent iPayment Holdings, Inc. by $11 million, resulting in an increased cash payment to existing holders of Holdings common stock who choose to receive cash in exchange for their common stock, the company said in Monday’s press release.

The company said a special committee of its board of directors, the board itself, its legal counsel and its investment bank are reviewing the proposal.

Revised terms

Under the revised 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 $40 million cash payment – reduced from $42.5 million – 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 $1 million cash payment, decreased from $2.5 million.

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 $36 million equity value – increased from $25 million – 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.

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.

As part of the refinancing, iPayment anticipates entering into one or more new credit agreements, which it has engaged J.P. Morgan to arrange.

The company would repay the obligations outstanding under its existing credit agreement and certain other debt, amend the existing indenture governing the notes, and make certain amendments to Holdings' certificate of incorporation, bylaws and existing investor rights agreement.

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

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 announcing the initial refinancing agreement on Jan. 17.

“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.

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

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