Intel Corp. (
), the world's largest manufacturer of semiconductor products,
has recently announced the pricing of senior unsecured notes
aggregating $6 billion. These bonds have been issued in four
tranches of different amounts, with varying coupon rates and
maturities. The offering is expected to close on December 11,
2012, subject to customary closing conditions.
The first tranch of $3.0 billion carries a coupon rate of
1.35% and will mature in 2017 while the second tranch of $1.5
billion, carrying a coupon rate of 2.70%, will mature in 2022.
The third and fourth tranches, each of $750 million, carry a
respective coupon rate of 2.70% and 4.25% and are slated to
mature in 2032 and 2042, respectively.
J.P. Morgan Securities LLC and Merrill Lynch, Pierce, Fenner
& Smith Incorporated will be acting as joint book-running
managers for the offering. Intel stated that the transaction
proceeds would be used for general corporate purposes and to
repurchase shares of its common stock under the company's
existing share repurchase authorization.
Intel's proposed senior unsecured notes have been assigned
ratings of A+ by the credit rating agency Standard & Poor's.
The credit rating acts as a financial indicator for potential
investors. S&P has affirmed Intel's corporate credit ratings
at these levels with a stable outlook. They stated that the
company's financial profile was quite healthy and the chances of
default remain minimal.
Intel is best known as a chipmaker and remains well positioned
in the server segment. In the recently reported third quarter,
Intel had $7.1 billion in long-term debt and 56 million in
short-term debt, resulting in a net cash balance of $6.5 billion
on its balance sheet. During the quarter, the company spent $1.12
billion on dividends and used $1.17 billion to repurchase its
common stock. At the end of the third quarter, Intel had another
$6.3 billion available for share repurchases under its existing
We believe that Intel has a strong balance sheet, which will
help the company to capitalize on investment opportunities and
strategic acquisitions, further improving its growth prospects.
We believe the offering of the senior notes will bring down its
cost of capital, further strengthening the company's balance
sheet and supporting its future growth.
However, the sluggish economic recovery and weak PC demand
stemming from tablet cannibalization, particularly from
), and its failure to expand into mobile gadgets continue to be
the causes for concern.
Intel shares carry a Zacks Rank #3 (Hold).
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