KKR Pumps $1.2 Billion into First Data
June 27, 2014 Leave a comment
Kohlberg Kravis Roberts & Co has injected $1.2 billion into credit card company First Data. Looking to reduce the interest payments for First Data, KKR also looks to prepare the company for a future public offering.
KKR, with the guidance of CEO Henry R. Kravis, committed to the payment. Of the total amount, $700 million will be funded from its own balance sheets and $500 million will come from its private equity fund that had been set up in 2006.
Said Kravis, “Our original investment thesis was that First Data was the largest credit and debit card company in the world, and that it would continue to grow if we could get the management right.”
The New York-based KKR first acquired First Data back in 2007 for $29 million. At the time, it was one of the world’s biggest leveraged buyout deals. However, since the recession, First Data has been struggling against consumer spending. At the end of the fiscal year in March 2014, First Data had a loss of $732 million, and the majority of its cash flow was absorbed in servicing the net debt of $24 billion.
The capital infusion would lower the annual interest burden of First Data by $375 million. Including the new investment, many believe First Data will account for almost 16% of KKR’s balance sheet investment portfolio. As a private equity firm, KKR often purchases struggling companies, invests in making them more efficient, and sells the improved company off later.