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14 Oct 2010
Approximately $1.775 billion of debt rated
New York, October 14, 2010 -- Moody's Investors Service assigned to Fifth Third Processing Solutions
(FTPS) a first-time Corporate Family Rating (CFR) and Probability
of Default Rating of Ba3. Concurrently, Moody's assigned
a Ba3 rating to FTPS' proposed $150 million senior secured revolving
credit facility and $1.5 billion senior secured first lien
term loan and a B2 rating on the $275 million senior secured second
lien term loan. The rating outlook is stable.
The ratings were assigned in connection with FTPS' proposed debt issuance,
which will be used to refinance the company's existing debt and fund the
acquisition of National Processing Company (NPC), which was announced
on September 15, 2010. The assigned ratings are subject to
review of final documentation and no material change in the terms and
conditions of the transaction as advised to Moody's.
FTPS' Ba3 CFR reflects the company's moderately high financial leverage;
high dependence to the debit card market, which may be susceptible
to changes from the Dodd - Frank Wall Street Reform and Consumer
Protection Act; integration risks associated with its proposed NPC
acquisition, and the highly competitive merchant acquiring and financial
institution servicing space.
Conversely, the Ba3 CFR is supported by the company's significant
size and strong market positions in electronic commerce and payment solutions
for financial institutions and merchants, which continues to benefit
from the secular shift from cash/check payment to electronic payments.
The acquisition of NPC will expand FTPS's merchant base within the
small and medium enterprise segment through the addition of merchants
and new sales channels (e.g., third-party sales
organizations, community banks, and VAR alliance partners).
The rating also considers the company's solid recurring transaction-based
revenue stream, which is supported by the client referral network
of Fifth Third Bancorp (49% owner of FTPS), multi-year
contracts with merchants and financial institutions, and non-discretionary
consumer spending. FTPS also benefits from a highly scalable processing
platform, which helps to drive high profit margins and good cash
flow generation and liquidity, and a diverse customer base with
minimal customer concentration by size or vertical industry.
The stable outlook is based on our expectation that FTPS will likely benefit
from an improving economic environment and growth in consumer spending.
We expect the company to maintain its strong market position and high
profitability through mid-single digit revenue growth and steady
cash flow as its merchant base expands from the NPC acquisition and the
ongoing shift to payment cards continues.
Pro forma for this transaction, FTPS' leverage as measured by its
adjusted debt to EBITDA will be in the high 4x range based on financial
results for the last twelve months pro forma for the NPC acquisitions.
Upwards rating pressure could arise if the company were to, among
other things, reduce its debt leverage such that adjusted debt to
EBITDA were to decline to below 3.5x on a sustained basis.
Downwards rating pressure might occur as a result of a deterioration in
the company's leverage and adjusted debt to EBITDA were to exceed
5.5x for an extended period of time.
The following first-time ratings/assessments were assigned:
Corporate Family Rating -- Ba3
Probability of Default Rating -- Ba3
$150 million Senior Secured Revolving Credit Facility -- Ba3
$1.5 billion Senior Secured First Lien Term Loan --
Ba3 (LGD-3, 42%)
$275 million Senior Secured Second Lien Term Loan -- B2 (LGD-6,
The principal methodology used in rating Fifth Third Processing Solutions
was Moody's Global Business and Consumer Service Industry rating methodology
published in August 2007. Other methodologies and factors that
may have been considered in the process of rating this issuer can also
be found on Moody's website.
Based in Cincinnati, OH, Fifth Third Processing Solutions,
with about $790 million of net revenue for the twelve months ended
September 30, 2010 (pro forma for the acquisition of NPC),
is a full service payment solutions provider servicing financial institutions'
and retailers' credit card, debit card, merchant and
private label programs primarily in North America. The company
is owned by Advent International (51% ownership) and Fifth Third
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, confidential and proprietary Moody's Investors
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of assigning
a credit rating.
MOODY'S adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
MOODY'S considers to be reliable including, when appropriate,
independent third-party sources. However, MOODY'S
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service
Andris G. Kalnins
Senior Vice President
Corporate Finance Group
Moody's Investors Service
Moody's Investors Service
Moody's assigns first-time Ba3 CFR to Fifth Third Processing Solutions; outlook stable
250 Greenwich Street
New York, NY 10007
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