Fitch Rates Western Union's Proposed Senior Unsecured Notes 'BBB+'

Business Wire, Nov 13, 2006

NEW YORK -- Fitch has assigned a 'BBB+' rating to Western Union's proposed offering of up to $2 billion in combined floating-rate notes due 2008 as well as fixed-rate notes due 2011 and 2036. Western Union expects to use the proceeds of this offering to redeem a substantial portion of its $2.4 billion bridge loan stemming from the company's recent spin off from First Data Corp. (rated 'A', with a Stable Outlook by Fitch).

Fitch continues to rate Western Union as follows:

--Issuer default rating (IDR) 'BBB+';

--Senior unsecured debt 'BBB+';

--Senior unsecured credit facility 'BBB+'.

--Commercial paper (CP) program 'F2'

The Rating Outlook is Stable.

Western Union's long-term ratings are supported by the company's:

--Extensive domestic and growing international agent network;

--Strong worldwide brand;

--Solid profit margins due to economies of scale, reflecting the company's significant size and market position;

--Consistent free cash flow;

--Solid liquidity and financial flexibility.

Fitch's rating concerns center on:

--Pressured operating margins due to strong competition in the payment services market from large international banks, as well as smaller, geographically concentrated niche competitors;

--Slightly pressured free cash flow due to higher capital spending requirements that Fitch attributes mostly to increased agent bonuses;

--Uncertainty regarding the long-term impact of immigration legislation in the United States on Western Union;

--Industry risk of incremental expenses or business disruptions associated with the heightened worldwide regulatory environment in which Western Union and its agents operate;

--Acquisition risk and potential for more aggressive shareholder-friendly activities.

Western Union's liquidity as of Sept. 30, 2006 was solid and consisted of: $1.3 billion in cash and equivalents; and a $1.5 billion revolving credit facility expiring September 2011, of which approximately $1.4 billion was available to the company. Also, on Nov. 6, 2006, Western Union initiated a $1.5 billion 4(2) commercial paper program. Free cash flow has averaged approximately $800 million annually for the past three years. Fitch expects free cash flow to trend below historical levels through at least 2007 due to higher capital spending and lower margin trends; however, free cash flow should remain consistently above $500 million annually over the next several years. Although Fitch believes Western Union is likely to utilize a portion of its free cash flow for debt reduction in the near term, the company's longer-term focus is anticipated to be acquisitions and share repurchases.

Total debt as of Sept. 30, 2006 was $3.5 billion and consisted of: $100 million drawn from a $1.5 billion revolving credit facility expiring September 2011; a $2.4 billion bridge loan expiring September 2007; and $1.0 billion in 5.93% senior unsecured notes due 2016. Fitch expects Western Union to repay the bridge loan in the near term through a combination of the proceeds from its proposed $2 billion senior unsecured notes offering, its CP program, and free cash flow.

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.