Whither First Data?

When Kohlberg Kravis Roberts announced its $29 billion deal for First Data back in April of 2007, it was one in a string of big-name private equity deals. The market reacted giddily, bidding up competing firms. At the time, many assumed the deal would prove to be yet another feather in the cap of KKR. But as the economy tanked, the deal was quickly added to the list of those in big trouble.

Has it failed completely? Not yet, notes Eric Grover of Intrepid Ventures, but there reasons to think it will. The recession was bad enough. But the regulatory tsunami that is engulfing the card industry is certainly complicating matters. So with $22.6 billion of debt, First Data's debt-to-EBITA ratio is 10.5, he notes. The payment processing behemoth, which is struggling across all business lines, "will not be able to pay off this mountain of debt out of operations. It may have to hive off assets and certainly has to raise equity capital." It will likely attempt an initial public offering in 2010. We'll see how much it can raise and whether that will be enough. 

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