Fiserv markets up to US$12bn bond to fund M&A

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Americas
William Hoffman

Fiserv began marketing Wednesday a US$10bn-$12bn bond to help fund its US$22bn purchase of payment processing firm First Data - the largest digital payments acquisition ever.

The financial services technology provider has mandated Citigroup, JP Morgan and Wells Fargo on the deal, which could price as soon as this week, say sources.

Fiserv, rated Baa2/BBB/BBB+, last tapped the bond market in September 2018 with a two-part US$2bn bond.

The 10-year note priced at Treasuries plus 115bp and has since widened out to a G-spread of 136bp, according to MarketAxess data.

The latest issuance will be used in part to swap high-yield debt issued by First Data (rated Ba2/BB-/BB-) into investment-grade paper.

CreditSights expects Fiserv’s gross leverage to increase to 4.2 times on a pro forma basis compared with 2.4 times at the end of the third quarter 2018.

The company suspended share repurchases until the transaction is expected close in the second half of 2019.

Management said it is looking to reduce leverage to “historical levels” in the two years following the close. CreditSights said three times gross leverage is achievable within 24 months and could move lower if synergies are realized.

Fiserv estimates it can generate US$900m of run-rate cost savings and an added US$500m of revenue through the acquisition, according to a press release.

That would help generate annual free cashflow exceeding US$4bn, which would go toward debt reduction, the company said.

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