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MarketScreener Homepage  >  Equities  >  Nyse  >  Visa    V

VISA

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Visa Inc. : Online Marketing Company Velo Holdings Files For Chapter 11

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04/03/2012 | 12:41pm EDT
   By Stephanie Gleason 
   Of DOW JONES DAILY BANKRUPTCY REVIEW 
 

Online marketing and sales company Velo Holdings Inc. filed for Chapter 11 bankruptcy Monday amid demands from Visa Inc. (V) and its credit-card processor after the passage of a federal law quelling aggressive online marketing practices caused revenue to plummet.

"Facing the threats from Visa and Paymentech, among other things, the debtors in consultation with their advisors determined it was prudent to file for bankruptcy," Velo said in court documents.

Velo said it plans to auction two segments, its health insurance sales and lead generation businesses, while restructuring the credit and identity theft protection and retail businesses. Barclays Bank PLC, which holds the first-lien loan, will credit bid $80 million for the insurance business and $20 million for the lead generation business, Velo said.

The company is also asking the court to approve $40 million in bankruptcy financing from Barclays so it can continue operations during the Chapter 11 case.

Velo blamed, in part, tighter regulatory control of one of its online marketing practices for its strained finances. The method redirects customers who have completed a purchase on its discount retail website to another website, a Velo subsidiary that sells fraud and identity theft protection services, and asks the customer to enroll.

V2V Corp. sells these services on freescore.com, idenityhawk.com, creditfyi.com and debtplan.com for a monthly fee charged to the customer's credit card.

In late 2010, regulations surrounding this practice changed. Under the new law, merchants are required to ask customers to re-enter their entire credit-card numbers, as opposed to only the last four digits, to sign up and authorize Velo to automatically charge the card a monthly fee.

The change caused company-wide revenue to drop to $485 million in 2011 from $590.8 million in 2010.

As revenue fell and debt levels remained high--it has $385 million and $205 million in first and second lien credit facilities--Visa demanded that Velo implement a new risk identification metric by May 2012. Velo projected this would cost it $13 million in earnings, but Visa threatened to stop allowing Velo to accept Visa credit cards if it didn't comply.

Velo defaulted on both its credit facilities in December to avoid a liquidity crisis, it said, prompting Moody's Investors Services to downgrade the company's debt ratings. As a result, Chase Paymentech LLC, Velo's credit-card processor, notified Velo it would terminate their agreement on April 20.

Velo claimed between $100 million and $500 million in assets and between $500 million and $1 billion in liabilities in its bankruptcy petition. It also put 13 subsidiaries under Chapter 11 protection Monday.

(Dow Jones Daily Bankruptcy Review covers news about distressed companies and those under bankruptcy protection.)

-Stephanie Gleason, Dow Jones Daily Bankruptcy Review; 202-862-1347; stephanie.gleason@dowjones.com

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Financials ($)
Sales 2019 22 773 M
EBIT 2019 15 351 M
Net income 2019 12 088 M
Debt 2019 7 684 M
Yield 2019 0,62%
P/E ratio 2019 30,53
P/E ratio 2020 26,25
EV / Sales 2019 15,9x
EV / Sales 2020 14,3x
Capitalization 355 B
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Mean consensus OUTPERFORM
Number of Analysts 39
Average target price 179 $
Spread / Average Target 10%
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NameTitle
Alfred F. Kelly Chief Executive Officer
Ryan McInerney President
Robert W. Matschullat Independent Chairman
Rajat Taneja Executive Vice President-Technology & Operations
Vasant M. Prabhu Chief Financial Officer & Executive Vice President
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