NEW YORK TheStreet) -- First Data Corp., the payment-processing company purchased in a leveraged buyout by Kohlberg Kravis Roberts at the peak of the credit bubble in 2007, is buckling under debt that pays investors interest four times that of U.S. Treasuries.First Data's long-term debt totaled $22.4 billion as of Sept. 30, 10.7 times earnings before interest, taxes, depreciation and amortization, or EBITDA, compared with 1.2 times in June 2007, according to Bloomberg data. KKR loaded up First Data with debt to make the acquisition, standard practice among leveraged buyout firms. First Data's EBITDA was just 1.2 times its interest expense in last year's third quarter, up from 13 times in 2007's second quarter. Dwindling profit reflects not only higher debt but a decline in processing revenue during the deepest economic recession in 80 years. The Sandy Springs, Ga.-based company was acquired by a unit of KKR in October 2007. The $27.5 billion deal was partially financed by Citigroup ( C), Credit Suisse ( CS), Deutsche Bank ( DB), HSBC ( HBC), Lehman Brothers (since acquired by JPMorgan Chase ( JPM)), Goldman Sachs and Merrill Lynch (since acquired by Bank of America ( BAC)).
If First Data's processing revenue fails to grow significantly, it's possible that bondholders -- who are enjoying fat interest payments -- may eventually be forced to take it on the chin and swap their bonds at a significant discount for new paper. -- Written by Philip van Doorn in Jupiter, Fla.