Significantly reduces debt,improves free cash flow, and positions
Company for growth and investment
Westlake Village, CA – January 17, 2017 – iPayment Inc. (the “Company”), a trustedprovider of payment and processing solutions for small and medium-sizedbusinesses (SMBs), and its parent, iPayment Holdings, Inc. (“Holdings”, andtogether with the Company, “iPayment”), today announced the signing of anagreement for a comprehensive refinancing of iPayment with the holders of approximately79% of the Company’s outstanding 9.50% Senior Secured Notes due 2019 (the“9.50% Notes”), which also hold approximately 41% of the common stock ofHoldings. The refinancing, once consummated, would result in a substantialdeleveraging of the Company, and would enable the Company to materially expandits services and product offerings. The refinancing is expected to close in thefirst quarter of 2017.
“This agreement is an important milestone for iPayment and reflects thestrong confidence and support for our business that iPayment’s significantstakeholders continue to demonstrate,” said OB Rawls IV, Chief ExecutiveOfficer of iPayment. “When this refinancing is completed later this quarter, wewill be well positioned to aggressively expand our channel sales initiatives,both in the traditional Agent/ISO space and in new, integrated verticals, andmake significant investments in new technologies and infrastructure to supportexisting and new partners.”
Robert Purcell, iPayment’s Chief FinancialOfficer, commented, “We are excited to have reached this significant agreementwith a group of our investor partners, and look forward to completing therefinancing, which will reduce our total debt by approximately $185 million, andlower our cost of debt and improve our annual free cash flow by more than $15million. With an improved credit profile, a strengthened financial position andincreased liquidity, iPayment will be well positioned to deliver exceptional valueto its customers, partners and investors.”
The refinancing is subject to a number of conditions, including obtainingthe new credit facility to be arranged by J.P. Morgan, many of which areoutside of the control of iPayment, and there can be no assurance as towhether, when or on what terms the refinancing will be consummated.
Under the terms of the agreement entered into with these debt andequity holders, iPayment intends to launch an exchange offer in which theholders of the Company’s 9.50% Notes will have the opportunity to exchangetheir 9.50% Notes for a pro rata portion of:
a $42.5 million cashpayment from iPayment;
cash in amountequal to accrued but previously unpaid interest, subject to certain conditionsbeing met;
for thosenoteholders meeting an early tender deadline, an additional cash payment of$2.5 million from iPayment;
91% of a newissue of preferred stock of Holdings; and
91% of the commonstock of Holdings.
In connection with the refinancing transactions, each existing holderof Holdings common stock will have the option to either:
receive a cashpayment in exchange for 100% of such holder’s common stock, determined based ona notional $25 million equity value for Holdings; to the extent this option iselected, the percentages of the preferred stock and the common stock to bereceived by the tendering Noteholders and by non-electing holders of common stockin the exchange offer will be correspondingly increased; or
maintain theirownership of Holdings common stock (which will be diluted to 9% of theaggregate outstanding common stock) and receive a distribution of a pro rataportion of 9% of the new issue of Holdings preferred stock.
Noteholders that hold existing Holdings common stock and participate inthe exchange offer will be required to waive the right to tender their existingcommon stock and to receive the cash payment in exchange for their existingcommon stock.
As part of the refinancing, the Company anticipates entering into oneor more new credit agreements and has engaged J.P. Morgan to exclusivelyarrange any such transaction. The Company would also repay the obligationsoutstanding under its existing credit agreement and certain other indebtednessof the Company and Holdings, and amend the existing indenture governing the9.50% Notes, and make certain amendments to Holdings’ certificate ofincorporation, bylaws and existing investor rights agreement. The debt andequity holders entering into the agreement with the Company have agreed to voteall shares of Holdings’ common stock held by them in favor of such amendments.
The securities to be issued in the refinancing will not be registered underthe United States Securities Act of 1933, as amended, and may not be offered orsold in the U.S. absent registration or an applicable exemption from such registrationrequirements. This notice does not constitute an offer to sell or thesolicitation of an offer to buy the securities described herein, nor shallthere be any sale of the securities in any jurisdiction in which such offer,solicitation or sale would be unlawful prior to the registration orqualification under the securities laws of such jurisdiction.
Forward-Looking Statements
Information in this press release may contain “forward-lookingstatements” about the Company and Holdings. These forward-looking statementsare subject to risks, uncertainties and assumptions, many of which are beyondour control, and are not guarantees of future results, performance orachievements, and actual results, performance or achievements could differmaterially from our current expectations as a result of numerous factors,including but not limited to the following: the effect of pending and threatenedlitigation; acquisitions; liability for merchant chargebacks; restrictivecovenants governing our indebtedness; migration of merchant portfolios to newbank sponsors; our reliance on card payment processors and on independent salesorganizations; changes in interchange fees; risks associated with theunauthorized disclosure of data; imposition of taxes on Internet transactions;actions by our competitors; and risks related to the integration of companiesand merchant portfolios that we have acquired or may acquire. We undertake noobligation to revise or update any forward-looking statements in order toreflect events or circumstances that may arise after the date of this release.
About iPayment
iPayment is a trusted provider of payment processing solutions in theU.S. With over 18 years of experience and more than 140,000 SMB customers, thecompany is consistently recognized for its depth of payments experience,breadth of product offerings, and commitment to transparency and SMB support.From new product innovation to customer service satisfaction, iPayment is anorganization focused on small business enablement and delivering relevant andimpactful services and solutions that help partners and SMB customers growtheir individual businesses. For more information on iPayment, please visit http://www.ipaymentinc.com.