Analog Devices Inc. (ADI) has recently announced the pricing of senior unsecured notes aggregating $500 million. These bonds carry a coupon rate of 2.875% and are due to mature in 2023. The offering is expected to close on June 3, 2013, subject to customary closing conditions.
Analog Devices stated that about $393 million of the transaction proceeds would be used for the redemption of its previously announced $375 million senior unsecured notes, carrying a coupon rate of 5.00%, maturing on June 6, 2014. The remaining net proceeds would be used for general corporate purposes, share repurchases, acquisitions, dividend payments and capital expenditures.
J.P. Morgan Securities LLC, Credit Suisse Securities (USA) LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated will be acting as joint book-running managers for the offering.
Analog Devices is a leading supplier of analog and DSP integrated circuits. In the recently concluded second quarter, the company spent $104.4 million on cash dividends and used $4.5 million to repurchase its common stock.
At quarter-end, Analog had $757.9 million in long-term debt on its balance sheet. During the quarter, the net debt position moved up slightly. Currently, the company’s debt-to-total capitalization ratio is only 14.5%, which will increase after the issuance of these notes.
We believe that Analog has a strong balance sheet, which will help the company to capitalize on investment opportunities and make strategic acquisitions, further improving its growth prospects. We believe the senior notes offering will bring down its cost of capital, thus strengthening the company’s balance sheet and supporting its future growth.
Currently, Analog has a Zacks Rank #3 (Hold). Other stocks that have been performing well and are worth a look include Magnachip Semiconductor (MX), Microchip Technology (MCHP) and Maxlinear Inc. (MXL), all carrying a Zacks Rank #2 (Buy).
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