Information technology (IT) security solutions provider Symantec Inc. (SYMC) recently commenced a public offering of senior unsecured notes worth $1.0 billion, in two parts. J.P. Morgan Securities LLC, a division of JPMorgan Chase & Co. (JPM), Merrill Lynch and Morgan Stanley & Co. LLC (MS) are acting as administrative agents for the purpose, along with certain other lenders. The offer will cease on June 14.
The first part, which will be for $600.0 million will mature in June 2017 and carry an interest rate of 2.75%. The issuance of the second part will bring in the remaining $400.0 million. These 3.95% interest bearing notes will mature in June 2022.
The notes have been assigned ratings of “Baa2” and “BBB” by Moody’s Corp. (MCO) and S&P 500, respectively. The rating indicates that the obligator has enough capacity to meet its financial obligations like short-term debt. The credit ratings act as financial indicators for potential investors.
The raised amount will enable Symantec to increase fund availability and finance its continuing working capital requirements, offering-related expenses, capital expenditure, and facilitate the repayment of its 1.0% convertible senior notes due in June 2013.
On March 30, 2012, Symantec had a senior notes balance of $1.1 billion and a Convertible senior notes balance of $1.0 billion. Following the recent debt issuance, the senior notes balance will go up by an additional $1.0 billion.
While the repayment of convertible notes will lower the debt balance once again, we note that the company is taking this debt at higher interest rates, which will have an impact on its interest charges.
Symantec exited the fourth quarter with $3.21 billion in cash, cash equivalents and short-term investments, up from $2.38 billion reported in the previous quarter. It bears a total debt (including senior notes and convertible notes) of $2.04 billion, roughly unchanged from the previous quarter. The balance sheet shows a good cash position and justifies the debt ratings conferred by the rating agencies.
Overall, Symantec’s performance was modest in the fourth quarter with the bottom line matching the Zacks Consensus Estimate. Symantec also provided a lackluster first quarter guidance given the continuing uncertainty over PC sales, cautious tech spending by different governments and the economic turmoil in Europe.
Symantec has a Zacks #5 Rank, implying a short-term Strong Sell rating.
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