DXC Issues Senior Notes Worth Euro 1.35B to Redeem Older Debt
With the latest Euro 1.35 billion worth of debt refinancing initiative, DXC will be able to lower its interest expenses significantly as well as exten...
DXC Technology Company DXC last week announced the pricing of Euro-denominated senior notes worth €1.35 billion to redeem its older high-interest carrying debts. The company issued the notes in two tranches of different maturities, carrying different interest rates.
The company priced notes worth €750 million at 99.846% of the aggregate principal amount, having an annualized interest rate of 0.45% and maturity in 2027. Another senior note worth €600 million, issued at a price of 99.715% of the aggregate principal amount, carries an annualized interest rate of 0.95% and will mature in 2031. The offering is anticipated to close on Sep 9, 2021.
This Zacks Rank #3 (Hold) company intends to use the proceeds from the aforementioned offerings to redeem the €400 million of outstanding borrowings under its Euro-denominated term loan facility. It also plans to repay its U.S. dollar-denominated 4.25% Senior Notes due 2025, Sterling-denominated 2.750% Senior Notes due 2025, and some other outstanding senior notes from the proceeds.
DXC Technology Company. Price and Consensus
With the aforementioned debt refinancing initiative, DXC will be able to lower its interest expenses significantly as well as extend the maturities of debt. The company’s latest move reflects its commitment toward reducing overall outstanding debt as well as interest expenses burden.
Notably, DXC was formed in 2017 by the merger of Computer Sciences Corp. and the enterprise services unit of Hewlett Packard Enterprise HPE. CSC, prior to the completion of the merger, took additional debt. This has amplified DXC’s total long-term liability, thereby, increasing its interest-cost burden.
To lower its debt burden, the company resorted to spin-offs and the divestment of non-core assets. It is also focusing on debt refinancing to reduce interest expenses. The strategy has helped it significantly reduce its outstanding debt level to $4.12 billion as of Jun 30, 2021, from $10.33 billion as of Jun 30, 2020. The company’s interest expenses reduced to $62 million in first-quarter fiscal 2022 from $106 million in the year-ago quarter.
Borrowing costs continue to be low, enabling companies to obtain easy financing. With the global treasuries offering low rates, corporate bonds and borrowings from banks are now witnessing high demand.
In the past few months, several companies have issued senior notes to improve liquidity. In June this year, Salesforce CRM issued $8 billion worth of senior notes to fund the acquisition of Slack Technologies.
In April, Marvell Technologies MRVL raised $2 billion through senior notes to fund the acquisition of Inphi Corporation. In March, NCR Corporation raised $1.1 billion by issuing 5.125% senior unsecured notes.
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