Fiserv
FISV
Last Price $52.41
My Fair Value Select
New major risk - Financial position
The company's interest payments are not well covered by earnings.
Net interest cover: 3.0x
This is considered a major risk. If the company is unable to fund interest repayments on its debt through profits, it may be forced into reducing its debt burden through selling assets, undertaking a potentially costly capital raising or even into bankruptcy in the worst case scenario.
The issue Fiserv has with its debt is the higher interest rates it now has to refinance at but it is absolutely laughable when you see the comments on here from so-called business experts about Fiserv going bankrupt when it's getting investment-grade ratings and new debt issued on a regular basis. Some people on here and their apparent lack of knowledge of business basics is very telling as to why the company is where it is.
I think this sums things up:
https://seekingalpha.com/article/4931938-fiserv-q2-being-greedy-may-prove-to-be-a-big-mistake
Fiserv bought First Data in an all-stock transaction valued at $22 billion. Under the agreement announced in January 2019 and finalized in July 2019, First Data shareholders received 0.303 Fiserv shares for each share of First Data common stock.
Wonderful. Fiserv management buys First Data for cash and stock. Fiserv managers leave and First Data managers are left in charge. And what do they do? Run the company into the ground like they did First Data. Brilliant. Very soon Fiserv will be on the block and someone else will be purchasing us for cash. But if they are smart, they will remove the C Suite people that put the company into this position.
@bx Sure but having a lot of debt and overhead is not the same as being unable to service it or being near bankruptcy.
@a9 That doesn’t match Fiserv’s current financial reality. It’s still investment grade, as the other Anonymous poster pointed out. Fiserv still generates billions in operating cash flow and remains compliant with its debt covenants. It just issued 1 billion euro of new bonds in June. So I don't know how you get “they can’t pay the old bonds and will be bankrupt within a year” out of this.
@b0 on the surface, that’s true. But there’s a ton of debt and overhead.
Fiserv is investment grade and cash cow.
not sure what you are talking about.
We know they’re following the sell-off strategy but that only goes so far. Once no buyers are left for the parts they’ll try to unload then the money runs out. Floating new bonds is doubtful since they can’t cover the payments on the old ones. That takes us to bankruptcy, which is where this has always been headed, ever since KKR engineered the deal to buy First Data. I give it a year.