DXC Technology (DXC) Prices Senior Notes Offering Worth $1.35B
DXC Technology's (DXC) latest $1.35 billion worth of senior notes offering will aid it in lowering interest expenses significantly.
DXC Technology Company DXC announced the pricing of a new US-dollar denominated senior notes offering of $1.35 billion on Sep 7. The company issued the notes in two tranches of different maturities, carrying different interest rates. It is worth mentioning that the move comes on the heels of a Euro denominated senior notes offering just a week ago.
The company priced notes worth $700 million at 99.900% of the aggregate principal amount, having an annualized interest rate of 1.80% and maturity in 2026. Another senior note worth $650 million, issued at a price of 99.910% of the aggregate principal amount, carries an annualized interest rate of 2.375% and will mature in 2028. The offerings are anticipated to close on Sep 9, 2021.
This Zacks Rank #3 (Hold) company intends to utilize the proceeds from the aforementioned offerings to wholly or partly repay its 4.125% Senior Notes due 2025, 4.750% Senior Notes due 2027, 7.45% Senior Notes due 2029 and some other indebtedness from the remaining proceeds (if any).
With the aforementioned debt refinancing initiative, DXC Technology will be able to lower its interest expenses significantly. The latest move reflects its commitment toward reducing overall outstanding debt and interest expenses burden.
Notably, DXC Technology 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 increased DXC Technology’s total long-term liability, thereby increasing its interest-cost burden.
DXC Technology Company. Price and Consensus
To lower its debt burden, the company resorted to spin-offs and the divestment of non-core assets. It is focusing on debt refinancing to reduce interest expenses. The strategy has helped it significantly reduce 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 decreased 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 have been witnessing high demand lately.
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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