NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
In connection with the Legacy Worldpay acquisition on December 7, 2017, the Company
priced an offering of $500 million aggregate principal amount of 4.375% senior unsecured notes due 2025 and £470 million aggregate principal amount of 3.875% senior unsecured notes due 2025, listed in the table above. The spot rate
of 1.3515 U.S. dollars per Pound Sterling at December 31, 2017 was used to translate the Senior Unsecured Sterling Notes to U.S. dollars. The proceeds received in the connection with the senior unsecured notes offering were held in escrow
and restricted as of December 31, 2017 pending the consummation of the acquisition.
Guarantees and Security
The Companys debt obligations at December 31, 2018 are unconditional and, with the exception of the Euro Note, are guaranteed by
Worldpay Holding and certain of Worldpay Holdings existing and subsequently acquired or organized domestic subsidiaries. The refinanced debt and related guarantees are secured on a first-priority basis (subject to liens permitted under the
Third Amended and Restated Loan Agreement) by a lien on substantially all the tangible and intangible assets of the Company and the aforementioned subsidiaries, including substantially all the capital stock (subject to a 65% limitation on pledges of
capital stock of foreign subsidiaries and domestic holding companies of foreign subsidiaries) and personal property of Worldpay Holding and any obligors under the Third Amended and Restated Loan Agreement as well as any real property in excess of
$25 million in the aggregate held by Worldpay Holding or any obligors (other than Worldpay Holding), subject to certain exceptions. The Euro Note is guaranteed by Worldpay Group Limited. Additionally, the Euro Note is also guaranteed by
Worldpay LLC as a result of the successful bond consent in July 2018.
There are certain financial and non-financial covenants contained in the Companys Loan Agreement
for the refinanced debt, which are tested on a quarterly basis. The financial covenants require maintenance of certain leverage and interest coverage ratios. At December 31, 2018, the Company was in compliance with these financial covenants.
8. TAX RECEIVABLE AGREEMENTS
December 31, 2018, the Company is party to two TRAs in which the Company agrees to make payments to various parties of 85% of the federal, state, local and foreign income tax benefits realized by the Company as a result of certain tax
deductions. Unless amended as discussed below, payments under the TRAs will be based on the cash savings realized by the Company by comparing the actual income tax liability of the Company to the amount of such taxes the Company would have been
required to pay had there been no deductions related to the tax attributes. Under the agreement between the Company and Fifth Third dated August 7, 2017, in certain specified circumstances, the Company may be required to make payments in excess
of such cash savings.
Obligations recorded pursuant to the TRAs are based on estimates of future deductions and future tax rates. On an
annual basis, the Company evaluates the assumptions underlying the TRA obligations.
On December 22, 2017 the President of the United
States signed into law Tax Reform, which amends the Internal Revenue Code to reduce tax rates and modify policies, credits and deductions for businesses. The changes to the federal tax rate and other modifications of the tax code have a material
impact on TRA benefits related to the 2018 and future tax years. As a result of Tax Reform, the Company reduced its TRA liability to reflect the impact of the lower rate for tax years beginning after December 31, 2017 by $418.9 million.
In connection with the acquisition of Mercury in 2014, the Company entered into the Mercury TRA and recorded a liability of
$192.5 million for the Mercury TRA and non-operating expenses of $8.1 million, $13.9 million and $19.5 million related to the change in fair value of the Mercury TRA during the years ended
December 31, 2018, 2017 and 2016, respectively.
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