iPayment starts agreed exchange and tender offer for 9˝% notes

New York, Feb. 16 – iPayment, Inc. and parent iPayment Holdings, Inc. announced the launch of an exchange offer which is intended to implement a comprehensive refinancing of the company.

The transactions will result in “substantial deleveraging” of iPayment and allow it to expand its services, product offerings and partnerships, according to a news release.

Holders of 90% of the company’s 9˝% senior secured notes due 2019 have agreed to the exchange offer. These investors also own 57% of the company’s stock.

Under the exchange, iPayment is offering for all of the notes a total of $40 million in cash, cash for accrued interest, an additional $1 million in cash for those who tender by the early deadline, 90.5% of a new issue of preferred stock of iPayment Holdings and 90.5% of the common stock of iPayment Holdings.

Existing stockholders will be able to either receive $1.31 per share in cash or alternatively to maintain their ownership, which will be diluted to a total of 9.5% of the company’s stock, and receive their share of 9.5% of the new issue of preferred stock.

Noteholders who participate in the exchange and who also own common stock will be required to waive their right to the cash option for their stock.

As part of the refinancing, iPayment, Inc. expects to enter into one or more new credit agreements. J.P. Morgan will arrange these loans.

The company’s existing credit agreement along with some other debt will be repaid. In addition, the indenture for the 9˝% notes will be amended.

Completion of the exchange is conditional on the arrangement of the new credit facility and the participation of holders of at least 95% of the 9˝% notes.

Settlement is expected late in the first quarter or early in the second quarter.

MacKenzie Partners, Inc. (800 322-2885, 212 929-5500 or proxy@mackenziepartners.com) is information agent and exchange agent.

iPayment originally announced a refinancing agreement with its noteholders on Jan. 17 but that was subsequently revised to reduce the cash payment to noteholders by $4 million and increase the equity value of iPayment Holdings by $11 million to $36 million from $25 million. Originally the cash payment was $42.5 million and the early tender premium was $2.5 million.

iPayment is a Westlake Village, Calif., provider of payment processing solutions.

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