Fascinating item sent to me by a mate that says that First Data are responsible for Frontier Airlines going bankrupt in the States.
Apparently,
Frontier blame First Data because they demanded a sudden jump in
collateral, due to the credit crunch, and started taking a large slice
of the 70% of Frontier's revenues which they controlled; the other 30%
is from cash, cheques, AMEX and Discover.
On April 8th, First
Data not only told Frontier that they wanted to raise Frontier's
collateral from $55 million to $130 million, but allegedly claimed
withholdings would rise from 45% to 100% by May 1st in order to build
this up.
As a result, Frontier declared bankruptcy on April 10th.
First Data ... how could you?
Aha ... First Data were as surprised as everyone else by this announcement.
Sounds like it could be a bit of brinkmanship between a customer and their processor, especially as Chapter 11 in the USA just means that you don't pay your suppliers for a while. And you can still book seats on the flights ...
...
even so, declaring bankruptcy is a bit radical just because your card
processor has kicked you in the collaterals so to speak.
Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal's Financial News. To learn more click here...
