Yesterday, MeadWestvaco Corp. (MWV) commenced a public offering of $250 million aggregate principal amount of 7.375% Notes due 2019. This is expected to close on Aug. 24, subject to customary closing conditions.
Net proceeds from the offering will be used for payment of the purchase price in a tender offer, for up to $250 million in aggregate principal amount of its 6.85% Notes due 2012, which was announced yesterday, and also for general corporate purposes.
MeadWestvaco continues to focus on maintaining its financial strength by aggressively managing working capital and suspending non-critical capital expenditure. The company generated operating cash flow of $266 million in the first half of 2009.
As on June 30, the company had $623 million in cash and cash equivalents on its balance sheet, up from $549 million at the beginning of the year. The company is on track to deliver positive free cash flow for 2009, which will further strengthen its financial position and support its investments across the board.
MeadWestvaco announced a series of cost-cutting initiatives last January with an initial target of $125 million by eliminating 10% of its global workforce and closing or restructuring of 12–14 manufacturing facilities. This helped in saving $46 million during the first half of 2009.
Hence, MeadWestvaco exceeded its initial annual savings target by 10% and plans to reduce its workforce by 15% by the end of 2009. It expects cumulative run-rate savings of $250–$300 million by mid-2010. This will help the company to stay afloat in the challenging economy. Thus, we maintain our Outperform rating on the stock.
Read the full analyst report on “MWV”
Zacks Investment Research
