ATLANTA First Data Corp. reported a 20% surge in second quarter losses to $189.1 million this morning, as debt service incurred from its 2007 leveraged buyout by Kohlberg Kravis Roberts, one of the biggest LBOs ever, continued to erase all of its substantial operating profits.
The payments processing giant reported a 1% increase in revenue to $2.6 billion and an operating profit of $270.3 million for its fiscal second quarter, but interest expense of $472.2 million wiped out all operating gains for the period.
First Data has struggled to turn around the $27 billion LBO, bringing in JP Morgan Chase banker Frank Bisignano in April as its third CEO in a year and embarking on cost-cutting measures like suspending all employee 401(k) contributions and replacing executives’ cash bonuses with stock. “Since joining First Data at the end of April, I have had the opportunity to meet with many of our customers and our very capable employees, which has confirmed my belief that this is a great company,” said Bisignano. “We have added several talented leaders to the executive team, and we made the decision to expand equity ownership to employees across the company, more closely aligning our success with strong results for our customers and investors.”
The second quarter financial reporting comes as another huge KKR deal, the record $48 billion buyout of Texas utility TXU Corp. is also teetering and is expected to require a financial restructuring, even a bankruptcy filing. TXU proposed a pre-packaged bankruptcy plan earlier this year amid nine straight quarters of losses that made servicing its $40 billion of debt unsustainable.
For the first six months of the year First Data reported a 1% increase in revenue to $5.3 billion, and a 70% surge in losses to $526.5million, as interest expense remained high at $920.6 million, erasing all of the company’s $461.4 million in operating profits.
