Computer Sciences Corporation
) recently raised $700 million through the sale of bonds. The
company issued bonds after a period of over three years.
The proceeds from the sale of the bonds will be used mainly to
repay debts. CSC made two $350 million issues having redemption
periods of three and 10-years. The 2.5% coupon rate three year debt
is priced to yield 220 basis points higher than similar-maturity
Treasuries, while the 4.45%, 10-year bonds are expected to generate
a spread of 280 basis points.
This is the second debenture issue that the company is expected
to issue after 3 years. The company had issued debentures in
February 2009, wherein the company sold around $1.7 billion of debt
in two segregated segments.
Moreover, the company is also planning to raise a term loan of
$250 million, where Bank of Tokyo-Mitsubishi UFJ Ltd. and Bank of
America Corp will be the lead bankers. A syndicate of lenders has
submitted their credit commitment for the planned credit to the
lead arrangers and they have a credit period of four
CSC's new management team is taking the necessary steps to
implement a multi-year strategy, which ultimately will help them to
improve CSC's competitive positioning. CSC is also focusing on
proper execution of the projects in hand.
On the other hand, CSC is being affected by the reduction in
government orders coupled with reduced business in the financial
vertical. Moreover, weaker demand in Europe is also affecting its
Uncertainty regarding the NHS order renewal had been weighing on
Computer Sciences' shares, which have been on a decline over the
past few months. But now we believe that the contract revival will
act as a catalyst, driving up share prices.
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Despite strong European exposure, strained federal budgets and
stiff competition from
), Computer Sciences retains a Zacks #2 Rank, implying a short-term