Credit & Capital

iPayment Closer to Solving Its Debt Problems

A distressed debt exchange reduces the credit-card processor's leverage but requires giving bondholders a large amount of equity.
Matthew HellerDecember 22, 2014
iPayment Closer to Solving Its Debt Problems

With the deadline on iPayment Inc.’s plan to reduce its debt by more than $200 million looming, the credit-card processor has announced there has been enough participation by bondholders to execute the deal.

The deadline for bondholders to tender had been set for Dec. 18 at 5 p.m. but iPayment last week extended it to 5 p.m. Monday. The debt restructuring plan, considered a distressed exchange, involves swapping two sets of bonds maturing in 2018 for a combination of new debt and equity.

Holders of $400 million in 10.25% bonds have tendered at a rate of 93.7%, iPayment said in a news release, and holders of $132 million in pay-in-kind notes have tendered at a rate of 97%.

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As the Wall Street Journal reports, iPayment unveiled the debt-reduction plan in November as its cash supply dwindled to $680,000 as of June 30 and debt-ratio requirements on its loan agreement and PIK bonds were to begin tightening. In the following quarter ending Sept. 30, the company’s cash supply rebounded slightly to $1 million.

Under the terms of the plan, holders of the 10.25% bonds are being offered $285 million in new bonds due in 2019 and 61.5% of the common stock of iPayment’s parent company; holders of the PIK notes are being offered $30 million in new bonds, 18.5% common stock and warrants to purchase more stock.

iPayment previously extended the deadline on Dec. 3, when it also raised the interest rate on the new bonds to 9.5% from 8.5% and increased the redemption price to 104.75% of par.

The company processes credit and debit cards for 106,000 active merchants, mainly small or midsize companies. In May, Moody’s cut iPayment’s debt rating, citing an “elevated risk of default” after it reported losses and fewer merchants using the service.

For the quarter ended Sept. 30, iPayment reported a loss of $4.7 million on revenue of $178.6 million, an improvement over the same quarter last year, when it lost $7 million on revenue of $167.8 million.

Source: Wall Street Journal