Amend: Fitch Downgrades First Data to 'BBB/F3' on LBO Announcement; Watch Negative.

NEW YORK -- This is a correction for a message issued earlier today. It amends information in the third full paragraph.

Fitch Ratings has downgraded First Data Corp. (NYSE:FDC) following its announcement of an accepted $29 billion leveraged buy-out (LBO) offer from Kohlberg Kravis Roberts & Co. (KKR):

--Issuer Default Rating (IDR) to 'BBB' from 'A';

--Senior unsecured debt to 'BBB' from 'A';

--Senior credit facility to 'BBB' from 'A';

--Commercial paper (CP) to 'F3' from 'F1'.

Fitch has placed FDC's ratings on Rating Watch Negative for the potential for further negative actions. The resolution of Fitch's Rating Watch will be determined by an evaluation of the ultimate financing of the transaction, overall mix of securities in the capital structure, and the company's ability to generate free cash flow after the transaction closes, which Fitch believes could be in excess of $100 million annually. Fitch's action affects approximately $2.5 billion in debt outstanding. The merger is subject to shareholders' approval and is expected to close in the third quarter of 2007.

The Rating Watch Negative reflects the uncertainty surrounding FDC's capital structure, future free cash flow and potential bond tender offer following the company's acceptance of a $29 billion LBO offer from KKR, which Fitch believes would represent the largest technology LBO to date. Based on First Data's comments, Fitch expects the company to tender for all of its outstanding senior unsecured bonds in conjunction with closing. However, the indenture which governs all outstanding issues does not contain a change of control provision and this tender offer does not appear to be a requirement. First Data does have the right to call the bonds under a make whole provision, however, the company has indicated it plans to issue a tender offer at an as of yet undisclosed price. Following the completion of a successful tender offer, Fitch expects to withdraw ratings on these securities and assign issue-specific and recovery ratings on the new debt securities.

All of First Data's current notes outstanding are based on a single indenture that provides minimal restrictions on additional secured debt, aside from requiring existing unsecured debt to be equally and ratably secured. Fitch believes First Data's bond indenture also does not provide a change of control provision nor does it stipulate financial covenants or restrict asset sales. Limitations on the incurrence of additional debt apply only to restricted subsidiaries with a maximum in aggregate of 20% of consolidated stockholders' equity allowable, which Fitch estimates to equal approximately $2.0 billion. However, Fitch anticipates FDC will tender for or repay the existing $2.2 billion of senior unsecured notes and ultimately refinance the current bank facility.

Fitch expects that in determining the appropriate capital structure for the proposed LBO, FDC will need to consider cash flow requirements stemming from the company's significantly higher debt balance and the company's ongoing international expansion through acquisition. First Data had previously estimated that it plans to spend $500 million-$750 million in acquisitions in 2007, which is well-beyond Fitch's expectation for pro forma free cash flow in the first year of an LBO at this price. However, First Data could accelerate its planned data center consolidation in anticipation of increasing profitability which would positively impact free cash flow beyond the initial capital expenditure requirements. A significant increase in operating margin would also likely positively impact the projected internal rate of return (IRR) for the LBO assuming an exit strategy, via IPO or sale, based on a multiple of EBITDA.

Fitch does not expect any issues related to the tax-free nature of FDC's prior spin-off of Western Union in 2006 to impede the proposed transaction. In addition, Fitch expects that First Data's ongoing search for a new CEO to replace Ric Duques, who previously announced his plan to retire at the end of 2007, will continue unchanged.

Currently, First Data has solid liquidity consisting of a $1.5 billion undrawn revolving credit facility expiring Oct. 24, 2010 (supporting the company's $1.5 billion CP program) and a cash balance of approximately $1 billion. Total debt outstanding is approximately $2.5 billion including $2.2 billion in various senior unsecured notes with maturities ranging from 2008 to 2015.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.