) recently commenced an offering of senior unsecured notes worth
$900.0 million for institutional buyers in the U.S. The notes
will mature in 2021. NCR International Inc. and Radiant Systems
Inc. will serve as guarantors for the notes issued.
The first part of the notes offering will raise $400.0 million
but information regarding interest rate of these notes was not
divulged. The notes have been assigned an issue-level rating of
"BB+"and a recovery rating of "5" by Standard & Poor's. The
rating indicates that the borrower's financial condition is
stable and it is capable of meeting roughly 10.0%-30.0% of
principal amount in case of any default. The credit ratings act
as financial indicators for potential investors.
Apart from this, NCR also issued $500.0 million unsecured
senior notes carrying an interest rate of 4.625%.
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The raised amount along with other revolving credit facilities
will enable NCR to fund the acquisition of a software company
Retalix Ltd. for a sum of $650.0 million, announced last week. In
case of any untoward situation regarding the wrapping up of the
acquisition, the fund will be used to finance its general
corporate expenses including pension-related expenses.
As of September 30, 2012, NCR had a total debt balance of $1.46
billion, roughly double of $740.0 million in the prior quarter.
The senior notes balance at the end of the third quarter 2012 was
$600.0 million, up from $5.0 million in the preceding quarter.
NCR exited the third quarter with $581.0 million in cash and cash
equivalents, up from $377.0 million reported in the previous
quarter. During the quarter, debt-capitalization ratio was 58.9%,
up from 43.0% in the previous quarter. This raises our concern.
Following the recent issuance, the senior notes balance will go
up by an additional $500.0 million. This will impact debt
capitalization in the coming quarters. Also, the raised debt
burden will have an impact on its interest charges. Interest
expense in the third quarter was $7.0 million or 4 cents per
share, which is quite significant.
Overall, NCR's performance was decent in the third quarter with
the bottom line surpassing the Zacks Consensus Estimate. The
company's operating segments performed well barring the Retail
solutions segment. The company has also provided decent fiscal
year guidance and believes that it is well positioned to deliver
good momentum across all its businesses.
We remain positive about NCR's deal wins from various industrial
sectors. But a high debt burden, European exposure and stiff
) and Wincor Nixdorf in the ATM market keep us concerned.
Currently, NCR has a Zacks Rank #3, (Hold).