Kohlberg Kravis Roberts & Co.
) recent news of leading a $3.5 billion worth private placement for
First Data Corp., resulted in a nearly 1.0% decline in its shares.
Notably, through this private offering, Kohlberg Kravis aims to
reduce the interest payment burden for First Data as well as
prepare grounds for a future public offering.
According to First Data, the Atlanta, GA-based global payment
processing company, Kohlberg Kravis has committed an investment
worth $1.2 billion. Of the total amount committed, $500 million
will come from the 2006 private equity fund and $700 million will
be funded from its own balance sheet. Another $2 billion will be
provided by new investors, including a diverse group of pension
funds, mutual funds, asset managers and wealthy individuals. The
remaining $300 million will come from its existing shareholders.
Notably, NY-based Kohlberg Kravis acquired First Data for $29.0
billion in 2007, in one of the world's biggest leveraged buyout
deals. Nonetheless, ever since the recession, the big payment
processor has been struggling against waning consumer spending. In
the fiscal year ended on Mar 31, 2014, First Data incurred a loss
of $732.2 million as the majority of its cash flow was absorbed in
servicing the net debt of $24.3 billion.
Now, the capital infusion would lower the annual interest expenses
of First Data by $375 million. The company would then have the
scope to transform into a solutions and innovation company that
would help its clients to grow their businesses.
The capital injection in the form of private placement may be a
make-shift arrangement with a public offering in the cards.
Irrespective of how the money is being raised, through public
offering or private placement, the sheer volume of the funds ($3.5
billion) is indeed significant.
Currently, Kohlberg Kravis carries a Zacks Rank #3 (Hold). Some
better-ranked investment managers include
Woori Finance Holdings Co., Ltd.
Ameriprise Financial, Inc.
). While Woori Finance Holdings sports a Zacks Rank #1 (Strong
Buy), both Ameriprise Financial and BlackRock hold a Zacks Rank #2
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