John Deere Credit Inc., the financial wing of Deere & Company (DE), raised capital by issuing securities worth C$150 million with a coupon rate of 3.25% and at an issue price of $99.695.
The notes will mature on April 8, 2015, for which the settlement date is April 8, 2011.
Deere has a long list of projects currently in progress in different parts of the world that requires financing. Deere has to comply with the Tier 4 emission standards. 2011 will be the first year of implementation of the new technology; the execution process will thus entail higher-than-normal maintenance and repair costs.
In addition, Deere also plans to capitalize on growth in the Indian tractor market, the largest in the world. So far Deere has invested $100 million for building a new factory and expanding the existing tractor facility in Pune. The company also opened a joint venture facility in India for the manufacture of backhoes and four-wheel-drive loaders, and broke ground for a new combine-harvester facility.
Furthermore, the company plans to build a construction-equipment factory in China for the production of four-wheel-drive loaders and excavators. In Russia, Deere is doubling the manufacturing space at its Domodedovo production facility. This will enable Deere to expand its product line in Russia by adding new equipment such as log forwarders, which are extensively used in the Russian forestry industry.
At the end of the first quarter Deere’s cash and cash equivalent amounted to $3,438 million, a decrease from $5,043.3 million as of January 31, 2010. Deere’s also reported a cash outflow from operating activities of $900.3 million at the end of the first quarter of 2011, which increased from an outflow of $318.3 million during the same period in 2010.
Recently, Caterpillar Inc. (CAT), one of the closest competitors of Deere, also raised debt amounting to $1 billion in three parts, soon after redeeming $15.15 million of debt, comprising six notes.
Deere currently retains a Zacks #2 Rank (short-term Buy rating).
Illinois-based Deere & Co. is engaged in the production and distribution of agricultural and forestry equipment, construction equipment and engines worldwide. The company sells its products in the U.S. and Canada through branch offices as well as through distributors and dealers for the resale of products internationally. Deere competes with Caterpillar Inc., CNH Global NV (CNH) and Kubota Corporation (KUB).
CATERPILLAR INC (CAT): Free Stock Analysis Report
CNH GLOBAL NV (CNH): Free Stock Analysis Report
DEERE & CO (DE): Free Stock Analysis Report
KUBOTA CORP ADR (KUB): Free Stock Analysis Report
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