California-based global networking solution provider, Juniper Networks Inc. (JNPR) yesterday announced an offering of Senior Notes worth $600 million in two parts. The offerings are likely to close on Mar 4.
The first part of the Notes offering, with an interest rate of 3.3%, will raise $300 million, and are scheduled to mature on Jun 15, 2020. The second part worth the same amount and carrying an interest rate of 4.35% are set to mature on Jun 15, 2025.
The joint book-running managers for the offering include Barclays Capital Inc., Citigroup Global Markets Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, BNP Paribas Securities Corp., Goldman, Sachs & Co., J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC and Wells Fargo Securities, LLC.
The company intends to use the proceeds from the offering for general corporate purposes, such as returning capital through share buyback and dividend, finance continuing working capital requirements, capital expenditure and funding potential acquisitions.
Borrowing costs continue to be low, enabling companies to obtain easy financing. Corporate bonds and borrowings from banks are in high demand as the U.S. treasuries are offering low rates. We believe that these Notes will provide financial flexibility to the company to drive long-term growth.
As of Dec 31, 2014, Juniper’s Senior Notes totaled $1.35 billion. With the issuance of new notes, the company will increase it to $1.95 billion. Apart from this, we believe that this will help the company in reducing its average interest rate on Senior Notes to 4.39% from 4.64% as on Dec 31, 2014.
Juniper exited 2014 with total cash, cash equivalents and investments of $1.97 billion and long-term debt of $1.35 billion, all under Senior Note facility. Moreover, the company generated cash flow of $763.4 million in 2014 from operating activities.
We believe that Juniper’s strong cash flow generation ability as well as availability of other credit facilities will help it to capitalize on investment opportunities and pursue strategic acquisitions, further improving growth prospects.
Currently, Juniper sports a Zacks Rank #1 (Strong Buy). Other stocks worth considering in the technology sector are InterDigital Inc. (IDCC), Harris Corporation (HRS) and Novatel Wireless Inc. (MIFI). While InterDigital sports the same Zacks Rank as Juniper, Harris and Novatel have a Zacks Rank #2 (Buy).
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