Quanta Services Inc. PWR recently amended and reinstated its credit agreement with lenders headed by top financial institutions, Bank of America Corporation BAC and JPMorgan Chase & Co. JPM. This was at par with Quanta Services’ aim of capitalizing on attractive pricing and terms.
This expanded Quanta Services’ senior secured revolving credit facility capacity to $1.810 billion from $1.325 billion. Also, the facility’s maturity date was shifted to Dec 18, 2020. Apart from added favorable terms, the amended credit facility offers enhanced flexibility for foreign currency borrowings. Moreover, the company has an option to raise the revolving facility commitments by up to $400 million upon fulfillment of obligatory conditions.
We believe the amended credit agreement will improve Quanta Services’ liquidity in the near term. At the end of third-quarter 2015, the company had cash & cash equivalents of $49.2 million, total shareholders’ equity of $3,189 million and long-term debt and notes payable of $348.2 million. With improved flexibility, Quanta Services can efficiently pursue larger projects, strategic buyouts and other growth initiatives.
Apart from this, the improved liquidity will aid Quanta Services’ commitment of increasing the wealth of its shareholders through share-repurchase programs. In the last reported quarter, the company bought around $1.03 billion common shares via open market repurchases and initial delivery received under an accelerated share repurchases arrangement. Also, Quanta Services collaborated with JPMorgan to enter into an accelerated stock repurchase arrangement to repurchase $750 million of shares. Such moves enhance investors’ confidence in the stock.
However, Quanta Services carries a Zacks Rank #5 (Strong Sell) due to weak analysts estimates stemming from sluggish third-quarter 2015 results. KBR, Inc. KBR is a better-ranked stock in the same industry carrying a Zacks Rank #2 (Buy).
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