Alliant Techsystems Inc.
) announced that it intends to resort to a new external financing
program to meet the new debt requirement of $1.86 billion. On Oct
8, 2013, the company plans to meet prospective lenders to discuss
about the financing.
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Per the plan, the new debt of $1.86 billion may comprise a $1.01
billion term loan A, a $0.25 billion term loan B and a $0.6
billion under the revolving credit facility.
The company intends to utilize the funds to finance its
previously announced acquisition of Bushnell Group Holdings, Inc.
("Bushnell"). In addition, it plans to use the funds to refinance
the existing senior term loans and revolving credit facilities
and use the rest for other general corporate purposes.
On Sep 5, 2013, Alliant announced that it will purchase Bushnell
from MidOcean Partners at a transaction value of $985 million.
Bushnell is a provider of branded sports optics, outdoor
accessories, performance eyewear and affordable sports products
for the sports enthusiast. Alliant is expected to complete the
acquisition in the third or fourth quarter of fiscal 2014,
subject to regulatory approvals and customary closing conditions.
It is evident that Alliant is currently following a steady
inorganic growth strategy to expand its operations. To complete
the acquisitions, the company is primarily utilizing its own cash
balance and funds under the revolving credit facility.
As of Jun 30 2013, Alliant's cash balance was $99.3 million
compared with $417.3 million as of Mar 31, 2013. The company's
cash position decreased on account of the acquisition of Savage
Sports Corporation, a parent company of Caliber Company. In
addition, the company utilized a certain portion of the limit
under the revolving credit facility for the acquisition. As of
Jun 30, 2013, Alliant had a borrowing limit of $0.2 million under
the Revolving Credit Facility and had outstanding letters of
credit of $0.1 million. Therefore, for now the current fund
position is not sufficient for acquisition of Bushnell.
We believe it is easier for the company to collect funds from
investors as it has a good debt service record with a rating of
BB assigned by credit rating agency Standard & Poor's Ratings
Services. Also, Alliant's stable credit profile, effort toward
minimizing debts, a stable inorganic growth strategy, and strong
operational efficiency will help it to attract more investors.
However, the U.S. defense budget cutbacks and current U.S.
government shutdown are our major cause of concern. Alliant
currently has a Zacks Rank #3 (Hold). However, other stocks from
the industry that are presently performing well include
Elbit Systems Ltd.
) with a Zacks Rank #1 (Strong Buy), and
B/E Aerospace Inc.
), both with a Zacks Rank #2 (Buy).