Visa puts another $700 million in litigation fund

SAN FRANCISCO - Visa Inc., the world's largest credit and debit card processor, said it has deposited $700 million into an account earmarked for litigation costs, a move that essentially acts as the repurchase of class B shares.

Visa set aside $3 billion of proceeds from its March 2008 initial public offering to cover potential liabilities in lawsuits alleging Visa conspired to stifle competition and fix prices. The account provides coverage and potential payments for judgments or settlements in U.S. legal cases against Visa, and acts to protect Visa's common shareholders from direct losses.

In December the company deposited $1.1 billion into the litigation escrow account.

U.S. financial institutions are the sole holders of class B shares. Under the plan, when Visa funds the account, only class B shareholders bear the expense. Thus, as Visa funds the account, it reduces the conversion price for class B shares into class A shares.

Each class B share now is now convertible to 0.5824 class A shares. The prior exchange rate was 0.6296 class A shares for every class B share.

Visa has also settled similar suits with American Express Co. and Discover Financial Services LLC. The Amex settlement required Visa to pay $2.07 billion over four years. Discover received a $2.75 billion settlement of its antitrust lawsuit with Visa and rival MasterCard Inc., in which it claimed the two processors harmed Discover's business by preventing their member banks from issuing credit cards for Discover's network.

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