In a strategic move to reduce interest outflow, CBS Corporation (CBS), announced the offering and redemption of debt, simultaneously. The company came up with a new debt offering of $700 million priced at 3.375% due 2022 and subsequently declared the redemption of its $700 million outstanding 6.75% debt due March 27, 2056.
As per the company, the redemption price includes 100% of the unpaid principal along with the accrued and unpaid interest. The redemption date is scheduled on March 28, 2012.
Moreover, the company intends to repay some or all of its $700 million of outstanding 6.75% senior notes due 2056 with the net proceeds from its new debt offering..
The move was quite obvious as the borrowing costs have gone down despite the significant disruption in the global credit markets. The company cannot allow itself to pay higher rates for many years in a time when debts can be issued with lower coupon rates. One of the company’s competitors, The Walt Disney Company (DIS), also issued debt to bank upon the low bond rates last year.
In the prior week, CBS Corporation announced a quarterly dividend of 10 cents per share payable on April 1, 2012, to shareholders of record as of March 12, 2012.
Recently, the company posted better-than-expected fourth-quarter 2011 bottom-line results. The quarterly earnings of 57 cents a share surpassed the Zacks Consensus Estimate of 53 cents and jumped 23.9% from 46 cents earned in the year-ago quarter.
CBS Corporation ended the quarter with cash and cash equivalents of $660 million and long-term debt of $5,958 million. During the quarter, the company repurchased 7 million shares for $170 million under its $3 billion share repurchase program bringing the total repurchases to $1.2 billion in fiscal 2011.
CBS remains well positioned to drive revenue growth in the coming quarters through its strategic initiatives and operating efficiencies. Management remains optimistic and expects growth momentum to continue in fiscal 2012 based on reverse compensation from affiliates, strong demand of its content and streaming, retransmission consent and political advertising.
Further, the company’s long-term agreements with the NFL, the NCAA, the SEC and the Grammy’s will generate stream of positive cash flows for the company in the long run.
Currently, we have a long-term Outperform rating on the stock. Moreover, CBS Corp. holds a Zacks #2 Rank, which translates into a short-term Buy rating.
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