) recently commenced an offering of senior unsecured notes worth
$1.0 billion in two parts. NetApp filed for the registration with
the U.S. Securities and Exchange Commission. J.P. Morgan
Securities LLC and Morgan Stanley & Co. LLC will be acting as
administrative agents for the purpose, along with certain other
The first part of the notes offering will raise $750.0 million,
carrying an interest rate of 2.0%. The notes will mature in 2017.
The second part of senior notes worth $250.0 million carry an
interest rate of 3.25%. These notes will mature in 2022.
The notes have been assigned a rating of "BBB+"by Standard &
Poor's. The rating indicates that the borrower's financial
condition is stable and is capable of maintaining its financial
stability over the near to medium term. The credit ratings act as
financial indicators for potential investors.
The raised amount will enable NetApp to increase fund
availability, finance its continuing working capital
requirements, capital expenditure and also fund potential
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As of October 26, 2012, the company had 1.75% convertible senior
notes worth $1.23 billion. Following the recent issuance, the
senior notes balance will go up by an additional $1.0 billion.
The raised debt burden will have an impact on its interest
charges. Interest expense in the last quarter was $19.8 million
or 5 cents per share, which is quite significant.
NetApp exited the second quarter of 2013 with $5.57 billion in
cash and cash equivalents, up from $5.44 billion reported in the
previous quarter. Cash generated from operations was $336.4
million compared with $229.2 million generated in the prior
quarter. This indicates solid liquidity position of the company,
which can boost lender confidence.
Overall, NetApp's performance was decent in the second quarter
with the bottom line surpassing the Zacks Consensus Estimate. The
company provided a cautious guidance on the back of ongoing macro
uncertainty caused by the European debt crisis and federal budget
Though new product refreshes, association with
Cisco Systems Corp.
), and ramp of ONTAP 8.1 are positives, we believe that uncertain
IT spending patterns and growth prospects of its archrival
) may pose serious threats.
Currently, NetApp has a Zacks Rank #3, (Hold).