LEARNING IN THE NEWS - XV - (For Intermediate and Advanced Business English Students)

- Visa Sets $18.8 Billion Offering
By REUTERS
Published: February 25, 2008

NEW YORK (Reuters) - Visa Inc, the world's largest credit card network, said on Monday it may raise up to $18.8 billion in the largest initial public offering ever, amid concern the global credit crunch could eat into card volumes.
The company filed with the U.S. Securities and Exchange Commission to sell 406 million Class A shares at $37 to $42 each, resulting in $15 billion to $17.1 billion of proceeds. Visa said it might sell another 40.6 million shares to meet demand, boosting the IPO's potential size to $18.8 billion.
A successful IPO would surpass the $10.6 billion offering in 2000 by AT&T Wireless Group. San Francisco-based Visa plans to list on the New York Exchange under the symbol "V."
The timing of Visa's offering is risky, as worries that the U.S. economy might be entering a recession have chilled investor demand for stocks and IPOs.
"Visa is large, and has strong global growth potential," said John Augustine, chief investment strategist at Fifth Third Private Bank in Cincinnati. "The downside to the Visa offering may be the timing. Our fear is that as credit deteriorates, consumer spending will go down, and volumes will go down for the card networks. That would hurt revenue and profit."
Investors may hope Visa shares will fare as well as those of smaller rival Master Card Inc .
MasterCard shares have more than quintupled since that Purchase, New York-based card network went public in a $2.4 billion IPO in May 2006.
The stock has risen by about one-fourth since mid-2007, even as the credit crisis began to widen beyond subprime mortgages. The Standard & Poor's financial index <.GSPF> is down about the same amount over that time.
"MasterCard has been an explosive stock, and investors may hope Visa will be the same," said Steve Roukis, a managing director at Matrix Asset Advisors Inc in New York, which invests $1.7 billion.
In the fourth quarter of 2007, Visa posted net income of $424 million on revenue of $1.49 billion, according to the SEC filing. MasterCard posted net income of $304.2 million on revenue of $1.07 billion.
Visa is controlled by about 13,300 member banks and finance companies. Many of these are struggling with mounting credit losses, and some with capital shortfalls.
"There could be added volatility (in Visa shares) if some of the member banks begin to sell their holdings, perhaps to shore up capital," Fifth Third's Augustine said.
Visa intends to set aside $3 billion of net proceeds to cover a wide variety of antitrust and other litigation.
These involve issuers such as American Express Co and Discover Financial Services , as well as major retailers that have accused card networks of price fixing.
Visa also intends to use $10.2 billion of net proceeds to redeem other shares, and the balance for general corporate purposes. It plans to pay a 10.5 cents per share quarterly dividend, for a dividend yield of about 1 percent.
Bank of America Securities , Citigroup Global Markets , Goldman Sachs & Co , HSBC Securities , JPMorgan Securities , Merrill Lynch & Co , UBS Investment Bank and Wachovia Securities are arranging the IPO, Visa said.
(Reporting by Lilla Zuill and Jonathan Stempel; additional reporting by Shivani Singh in Bangalore; Editing by Derek Caney)
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Vocabulary:
Sets: To calculate approximately: approximate, estimate, place, put, reckon
Raise: To gather together; collect
Amid: Surrounded by; in the middle of
Crunch: liquidity crisis
Filled: To enter (a legal document) on public official record
Share: Any of the equal parts into which the capital stock of a corporation or company is divided
IPOs: initial public offering (IPO) - stock issued for the first time by a public company.
Surpass: To be or go beyond, as in degree or quality; exceed
Downside: A disadvantageous aspect
Revenue: the entire amount of income before any deductions are made
Profit: The return received on a business undertaking after all operating expenses have been met
Fare: To progress or perform adequately, especially in difficult circumstances: do, fend, get along, get by, manage, muddle through, shift
Quintupled: Five times as much in size, strength, number, or amount
Subprime Mortgages: A subprime mortgage is granted to borrowers whose credit history is not sufficient to get a Conventional Mortgage. Often these borrowers have impaired or even no credit history. These can also include interest-only loans.
fourth quarter: 3ro Trimestre (easiest explained in Portuguese)
Income: The amount of money or its equivalent received during a period of time in exchange for labor or services, from the sale of goods or property, or as profit from financial investments.
Struggling: strenuous effort
Shortfalls: failure to attain a specified amount or level; a shortage
Volatility: Tending to vary often or widely, as in price
Holdings: Legally owned property, such as land, capital, or stocks. Often used in the plural
Shore up: support by placing against something solid or rigid - Synonyms: prop up, prop, shore
Set aside: Separate and reserve for a special purpose
Proceeds: That which comes forth or results; effect; yield; issue; product; sum accruing from a sale
Antitrust: Opposing or intended to regulate business monopolies, such as trusts or cartels, especially in the interest of promoting competition
Litigation: to dispute, litigate; lis, litis, dispute, lawsuit
Redeem: To recover ownership of by paying a specified sum
Dividend: A share of profits received by a stockholder or by a policyholder in a mutual insurance society
Yeld: percentage rate of return paid on a stock in the form of dividends, or the effective rate of interest paid on a bond or note