Englewood-based Western Union Co., the largest U.S. money-transfer company, sold $2 billion of fixed- and floating- rate debt to refinance most of a loan the company used to fund its spin off from First Data Corp. in September.
The debt, rated BBB+ by Fitch Ratings, comprised $1 billion of 5.4 percent notes due in five years, $500 million of 6.2 percent bonds maturing in 30 years, and $500 million of two-year notes that pay interest at 15 basis points above the London Interbank Offered Rate, or Libor.
Proceeds will be used to repay part of a $2.4 billion bridge loan that Western Union’s spinoff in September from First Data, according to Fitch. The sale also comes less than a month after Western Union said third- quarter profit rose 7 percent to $258.1 million in its first report as a stand-alone company after the spinoff.
“The ratings on Western Union are based on the strength of the company’s premiere money transfer franchise, its history of strong and consistent cash flow and earnings, and its relatively low exposure to credit, interest rate and liquidity risk, which are typically more pronounced in most financial companies,” Standard & Poor’s said in a report today. “Offsetting rating factors include the company’s lack of product diversification, a high level of regulatory exposure, and high leverage.” Western Union had been First Data’s biggest and fastest- growing unit before the spinoff. It must now compete by itself against rival money-transfer services including Moneygram International Inc. At the same time the Arizona attorney general is seeking to halt Western Union transfers from 29 states as part of a Mexican smuggling probe.
The five-year fixed-rate notes were sold to yield 87 basis points more than similar maturity Treasuries, while the 30-year bonds have a yield spread of 158 basis points, or 1.58 percentage point. The difference for bonds of similar maturities and ratings averages 80 basis points and 118 basis points, according to Merrill Lynch & Co. index data.
Western Union also issued bonds in September, selling $1 billion of 5.93 percent notes due in 2016. The yield spread was 120 basis points at the time they were issued, according to data compiled by Bloomberg News.
