Mail Stop 4561
July 17, 2007
Joseph W. Saunders
Chief Executive Officer and Chairman of the Board of Directors
Visa Inc.
P.O. Box 8999
San Francisco, California 94128-8999
Re: Visa Inc.
Registration Statement on Form S-4
Filed June 22, 2007
File No. 333-143966
Dear Mr. Saunders:
We have reviewed your filing and have the following
comments.
Where indicated, we think you should revise your document in
response
to these comments. If you disagree, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
information so we may better understand your disclosure. After
reviewing this information, we may raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
General
1. Please confirm that you will file with the Commission all
materials used to aid in the solicitation of proxies. Please
provide
us with copies of these materials and indicate the date they were
first used. Please provide us with a form of the proxy card.
2. Please provide us with copies of the "board books" or similar
documentation provided to the boards and management in connection
with the proposed restructuring. Such materials should include
all
presentations made by the financial advisors.
3. Please file consents from each financial advisor with respect
to
the fairness opinions included in the registration statement.
4. Please advise us how you calculated that 557,982,489 shares of
Class USA common stock should be registered. We note that
pursuant
to the VI LLC reallocation and merger 127,800,553 class USA shares
will be issued and pursuant to the VISA USA merger 426,390,481
class
USA shares will be issued. Please advise us why 3,791,455
additional
class USA shares are being registered.
5. Please advise us whether you intend to register the Visa
International merger transaction and, if not, what exemption from
the
1933 Act you intend to rely upon. Please clarify in your analysis
which entity is the issuer in this transaction.
6. Please provide an analysis regarding the 1933 Act registration
implications of the true-up transaction.
7. Please provide us with copies of any graphics, maps,
photographs,
and related captions or other artwork including logos that you
intend
to use in the prospectuses.
Q & A, page iii
8. Please include in this section or on the summary a structure
chart
of the post-restructuring company.
9. Please briefly describe Inovant LLC where first referenced.
Q: What are the reasons for the restructuring, page iii
10. Please briefly describe why the new structure will enable you
to
accomplish the stated goals better than the current structure.
Q: If I am a member in one..., page iv
11. Please briefly describe the significance of the term
"transitory
LLC."
Q: What proposals are the members of Visa International..., page
xi
12. Please disclose that in lieu of a meeting, action by Visa
International and Visa USA will be taken by written consent.
Please
disclose the date by which written consents must be received.
Refer
to Item 1 of Schedule 14A.
Summary, page 1
13. Please eliminate repetitive disclosures in the summary and
Q&A.
Our retrospective responsibility plan..., page 20
14. Please include a separate risk factor dedicated to the
litigation
dilution risk of the Class B shares.
We have granted to Visa Europe..., page 23
15. In order to describe the scope of the liquidity risk of the
put
option, please provide an estimate or a range of the amount you
would
have to pay for the Visa Europe shares. If this is impracticable,
please advise us why.
Purpose of the General Meeting, page 35
16. Please provide brief descriptions of the bylaw amendments and
the
applications for Supplementary Letters Patent.
Global Discussions Begin, page 38
17. Please describe the reasons why the board, at the February 21,
2006 meeting, believed the current association model would not
meet
the needs of the current and future business environment.
Development of the Transaction Documents and Approval, page 45
18. Please disclose whether or not the various fairness opinions
considered the potential litigation liability and the agreements
with
respect thereto of each Visa entity. Please also clarify this
point
in your description of the fairness opinions.
19. We note that Dundee Securities was retained in January 2006
but
first made a board presentation in May 31, 2007. Please confirm
that
Dundee Securities had not previously made a presentation or
provided
any analysis to the board prior to this meeting.
20. Please provide additional disclosure regarding the "four
considerations" referenced in your description of the June 7, 2007
Visa Canada meeting.
Opinion of Visa International`s Financial Advisor, page 52
21. Please disclose why Lehman identified financial exchanges,
like
ICE and NYMEX, as comparable companies.
Visa Canada Restructuring, page 90
22. Please revise your description of the Canada restructuring to
clarify the distinction between the share exchange for 22,034,685
shares and the subsequent merger. It may not be clear to a member
why a two-step transaction is necessary.
Inovant US Holdco Merger, page 91
23. We note that VESI will deliver to Visa Inc. all LLC interests
it
holds in Inovant. Since Inovant appears to be a corporation,
please
advise us how there are LLC interests outstanding.
True-Up of Merger Consideration
24. Please disclose when the true-up conversion will occur.
Equity Allocation to Members..., page 94
25. Please disclose what happens to membership interests of
ineligible persons.
Unaudited Pro Forma Condensed Combined Financial Information
2. Visa Canada Consolidated Financial Statements, page 117
26. Tell us whether the exchange rate used to convert the
statements
of operations of Visa Canada for the six months ended March 31,
2007
and the year ended September 30, 2006 from Canadian dollars to US
dollars differed from the rate used to convert the March 31, 2007
balance sheet. To the extent the exchange rates used differed,
tell
us how you considered the need to disclose all exchange rates used
to
calculate the translation adjustments.
3. Visa Europe Transaction, page 120
27. We note that for purposes of calculating your pro-forma
earnings
per share, you have assumed that you will not file an initial
registration statement of Form S-1 in connection with an initial
public offering of common stock. Furthermore, we note that for
purposes of calculating the below market value liability related
to
certain trademark and technology license agreements with Visa
Europe
that you have assumed that you will file an initial registration
statement. Explain to us how you determined is was appropriate to
assume you would file a registration statement related to an
initial
public offering in one instance, but that you would not in the
other.
Additionally, tell us what impact assuming you would not file a
registration statement would have on the calculation of the value
of
your trademark and technology license agreements.
6. Combination and Pro Forma Adjustments
Combination Adjustments - A, page 124
28. Tell us in greater detail the reclassification adjustments
required to conform the presentations of Visa USA, Visa
International
and Visa Canada. Explain to us how you determined that it would
not
be necessary to include a description of each these adjustments in
your disclosure.
Combination Adjustments - B, page 124
29. Tell us in greater detail the adjustments required to
eliminate
the effects of transactions and cross-ownership among and between
Visa U.S.A, Visa International and Visa Canada. Explain to us how
you determined that it would not be necessary to include a
description of each of these adjustments in your disclosure.
Combination Adjustments - D, page 125
30. Explain to us the rationale for transferring certain
investments
held by Visa International from the trading securities category to
available for sale.
Business of Visa Inc., page 133
31. In the initial paragraph, please clarify your reference to the
term "customers."
Transaction Processing Services, page 136
32. Please clarify the differences between the "acquirer" bank and
the "issuer" bank.
Settlement, page 137
33. Please disclose who processes your domestic transactions
outside
the U.S.
Department of Justice Antitrust Case..., page 154
34. Please briefly describe bylaw 2.10(e).
Settlement risk guarantee, page 185
35. Please tell us and disclose the reasons for the reduction of
the
settlement risk guarantee obligation in fiscal year 2005 as
opposed
to previous years. Management currently discloses that it had
completed sufficient economic cycles, loss events and economic
incidents to utilize the updated loss factors. Within your
response,
please tell us how many economic cycle had passed between noticing
the trend and adjusting the assumptions, the historic and assumed
loss factors over the same period, an explanation for the
differences
between the two loss factors for the periods presented, and what
is
meant by economic incidents.
Related Party Transactions, page 200
36. Please disclose your members that are lenders on your credit
facilities.
Contractual Obligations, page 200
37. Please tell us why you have excluded volume and support
incentives from your table of contractual obligations or revise
your
table to include these obligations.
Critical Accounting Estimates
Revenue Recognition, page 201
38. Please disclose whether there have been any material
differences
between estimated amount of card, volume and support incentives
recorded and the actual performance. Please make similar changes
to
the appropriate sections of Visa U.S.A.
Settlement Risk Guarantee, page 203
39. Please quantify the significant assumptions used to determine
management`s estimated. Specifically disclose the estimated
probability of failure by each member, average settlement
exposures,
average number of days to settle and historical losses. Please
disclosure any significant changes in the assumptions used by
management and the reasons for the change. Lastly please provide
a
sensitivity analysis of these assumptions which quantifies the
effects of reasonable likely changes in those assumptions. Please
make similar changes to the appropriate sections of Visa U.S.A and
Visa Canada.
Pension, page 204
40. It appears that management relies on the advice and expertise
of
actuarial consultants in determining the critical assumptions used
in
your pension postretirement estimation process. These actuarial
consultants appear to be experts. As such, please name the
actuarial
consultants and provide the proper consents. Please make similar
changes and provide similar consents for actuarial consultants
used
by Visa U.S.A and Visa Canada.
Management`s Discussion and Analysis of Financial Condition and
Results of Operations of Visa U.S.A
Overview, page 213
41. Explain to us how your non-GAAP measures "Adjusted Operating
Revenues" and "Adjusted Operating Income" as well as your non-GAAP
measure of "Operating Expenses (Non-GAAP)" disclosed on page 218,
comply with the provisions of Item 10(e) of Regulation S-K. To
the
extent these measures adjust GAAP measures for recurring items
explain to us how you have met all of the disclosure requirements
of
question eight of the Frequently Asked Questions Regarding the Use
of
Non-GAAP Financial Measures.
Related Parties, page 234
42. Please disclose your two 10% customers.
Related Party Transactions, page 257
43. Please disclose the three members responsible for 10% or more
of
revenues.
Management Following the Restructuring, page 262
44. Please update your management section, including for the
recent
appointment of Hans Morris.
Compensation Discussion and Analysis, page 265
45. Please disclose whether the incentive plans of Visa USA and
VISA
International will continue after the restructuring.
Grants of Plan-Based Awards, page 268
46. We note that the Visa USA and Visa International incentive
plans
adjust awards based on corporate performance. Please include
disclosure regarding these performance goals. If you believe such
disclosure would result in competitive harm such that the
information
could be excluded under Instruction 4 to Item 402(b), please tell
us
why. To the extent that it is appropriate to omit specific
goals,
discuss how difficult it will be for the named executives or how
likely it will be for the companies to achieve the target goals.
Please see Instruction 4 to Item 402(b) of Regulation S-K.
Employment Arrangements, page 272
47. Please disclose the performance measures that will be used to
determine the annual bonus and the long-term bonus of Mr.
Saunders.
Please include additional disclosure regarding how these bonus
amounts were determined.
Potential Payments on Termination of Change -in-Control, page 274
48. Please disclose whether the change of control provisions
disclosed will be triggered by this restructuring.
Quantification of Termination Payments and Benefits, page 277
49. Please quantify the payments actually made in connection with
the
resignation of Mr. Coghlan.
Certain Relationships and Related Party Transactions, page 286
50. Please include the disclosure required by Item 404(b) of
Regulation S-K.
Financial Statements
Visa Inc.
Notes to Consolidated Financial Statements
4. Global Restructuring Agreement
Put-Call Option Agreement on Visa Europe Shares, page F-6
51. Please disclose the fair market value of the put option as of
June 19, 2007.
Visa International and Subsidiaries
Consolidated Statements of Operations, page F-10
52. Please tell us why you have not presented the volume and
support
agreements as a separate line item with operating revenues.
Note 2 - Significant Accounting Policies
Revenue recognition, page F-16
53. We note that service fees recorded for the quarter are
estimated
based on prior quarter results. Explain to us the Company`s
policy
for adjusting service fees for actual results after quarter end.
In
your response, tell us when actual results are normally received
by
the Company from its members. Additionally, tell us the amount by
which your quarterly estimate differed from actual results for
each
period presented in your filing.
Note 4 - Incorporation of EU Region
54. Explain to us how you determined that the operations of Visa
Europe should not be classified as discontinued operations for all
periods presented. Reference is made to paragraphs 41 through 44
of
SFAS 144.
Note 14- Retirement and Other Employee Benefit Plans
United Kingdom Plans, page F-38
55. Please tell us and disclose any ramifications of the actual
allocation of pension plan`s assets outside of the minimum and
maximum permissible range.
Visa U.S.A. Inc. and Subsidiaries
Note 2 - Significant Accounting Policies
Facilities, Equipment, and Software, page F-90
56. Explain to us the Company`s basis in GAAP for capitalizing
software costs related to internally developed software once costs
incurred exceed $1 million. Tell us how you applied the guidance
in
paragraphs 19 through 30 of SOP 98-1 in arriving at a $1 million
threshold for capitalization.
Volume and Support Agreements, page F-91
57. Explain to us your basis in GAAP for capitalizing costs
incurred
related to your Volume and Support Agreements. Additionally,
explain
to us your rationale for classifying the amortization of these
amounts as a reduction to revenue and whether there have been any
material adjustments upon review of the accruals.
58. Tell us whether Visa International or Visa Canada have entered
into similar volume and support agreements. To the extent that
they
have, explain to us how these agreements have been accounted for
by
each entity.
Operating leases, page F-92
59. Tell us whether you record rent expense related to lease
agreement which contain escalation clauses on a straight line
basis.
Note 3 - Cumulative Effect of Change in Adoption of Accounting
Principle
Volume and Support Agreements, page F-95
60. Explain to us how you determined that it would be preferable
to
record amortization of volume and support agreements over the
contract term of the agreement rather than the shorter of the
contract term or the estimated life of the underlying term.
Additionally, explain to us the impact the change in estimate has
had
on your financial statements.
Note 4 - Inovant, Inc. and Inovant LLC, page F-95
61. Explain to us how you determined it would be appropriate to
record the loss incurred on the sale of a minority interest in
Inovant LLC as an adjustment to your litigation provision.
Part II
Undertakings
62. Please include the undertakings required by Item 512(a)(5) and
(6) of Regulation S-K.
Exhibits
63. We note from the exhibit index that you have filed a
confidential
treatment request; however it is not clear for which exhibit.
Please
clarify. In addition, please provide us a copy of the complete
confidential treatment request that was filed with the Commission.
64. Please file a copy of your legality and tax opinion or provide
us
with a draft, so that we have an opportunity to review it. Please
also file any material agreements required to be filed under Item
601
of Regulation S-K.
* * * *
As appropriate, please amend your registration statement in
response to these comments. You may wish to provide us with
marked
copies of the amendment to expedite our review. Please furnish a
cover letter with your amendment that keys your responses to our
comments and provides any requested information. Detailed cover
letters greatly facilitate our review. Please understand that we
may
have additional comments after reviewing your amendment and
responses
to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing to be certain that the
filing includes all information required under the Securities Act
of
1933 and that they have provided all information investors require
for an informed investment decision. Since the company and its
management are in possession of all facts relating to a company`s
disclosure, they are responsible for the accuracy and adequacy of
the
disclosures they have made.
Notwithstanding our comments, in the event the company
requests
acceleration of the effective date of the pending registration
statement, it should furnish a letter, at the time of such
request,
acknowledging that:
? should the Commission or the staff, acting pursuant to
delegated
authority, declare the filing effective, it does not foreclose the
Commission from taking any action with respect to the filing;
? the action of the Commission or the staff, acting pursuant to
delegated authority, in declaring the filing effective, does not
relieve the company from its full responsibility for the adequacy
and
accuracy of the disclosure in the filing; and
? the company may not assert staff comments and the declaration
of
effectiveness as a defense in any proceeding initiated by the
Commission or any person under the federal securities laws of the
United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in connection with our review of
your
filing or in response to our comments on your filing.
We will consider a written request for acceleration of the
effective date of the registration statement as confirmation of
the
fact that those requesting acceleration are aware of their
respective
responsibilities under the Securities Act of 1933 and the
Securities
Exchange Act of 1934 as they relate to the proposed public
offering
of the securities specified in the above registration statement.
We
will act on the request and, pursuant to delegated authority,
grant
acceleration of the effective date.
We direct your attention to Rules 460 and 461 regarding
requesting acceleration of a registration statement. Please allow
adequate time after the filing of any amendment for further review
before submitting a request for acceleration. Please provide this
request at least two business days in advance of the requested
effective date.
You may contact Bob Telewicz at 202-551-3438 or Kevin Woody,
Accounting Branch Chief, at 202-551-3629 if you have questions
regarding comments on the financial statements and related
matters.
Please contact Michael McTiernan at 202-551-3852 or me at 202-551-
3495 with any other questions.
Sincerely,
Elaine Wolff
Branch Chief
cc: Kevin Keogh, Esq. (via facsimile)
Joseph W. Saunders
Visa Inc.
July 17, 2007
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