) recently announced the pricing of Senior Unsecured Notes
aggregating $900 million. The Notes are being offered to qualified
institutional buyers under private placement. These Notes have been
issued in two tranches of same amounts but with varying interest
rates and maturities. The offering is expected to close on Aug 6,
2014, subject to customary closing conditions.
The tranches of $450 million each, carrying an annual interest
rate of 0.50% and 1.75%, are due to mature on Aug 15, 2020 and Aug
15, 2021, respectively. The new issuance will require the company
to pay semi-annual interests in arrears on Feb 15 and Aug 15 of
each year, beginning Feb 15, 2015.
The Notes due to mature in 2020 are convertible into Qihoo's
American Depositary Shares (ADS), at an initial rate of 7.9789 ADS
per US$1,000 principal amount of the Notes (equivalent to an
initial conversion price of approximately US$125.33 per ADS). On
the other hand, the Notes due to mature in 2021 can be converted at
an initial rate of 8.2799 ADS per US$1,000 principal amount
(equivalent to an initial conversion price of approximately
US$120.77 per ADS).
In order to manage over allotment, the joint book-running
managers for the offering have been granted a 30-day option to
purchase up to an additional US$67.5 principal amount of both the
Notes. Qihoo expects to use the net proceeds from the offerings
primarily for general corporate purposes.
Qihoo continues to solidify its position as the undisputed
leader in the Chinese Internet market with its PC security products
covering nearly 95% of Chinese PC Internet users and the mobile
security solutions covering approximately 70% of Chinese smartphone
At quarter-end, Qihoo had cash and cash equivalents of $901.6
million versus $1,013.5 million in the prior quarter. The company
had $6.0 billion in total debt (long-term plus short-term). The
offering of the Senior Notes will lower its cost of capital,
thereby strengthening the company's balance sheet and supporting
Qihoo expects to invest in product development and technology
innovation as well as in expanding its coverage of PC and mobile
Internet, going forward. Its consistent focus on Internet and
product innovation has been the cornerstone of its success.
We believe a strong balance sheet will help Qihoo capitalize on
investment opportunities and make strategic acquisitions, further
improving its growth prospects.
Currently, Qihoo has a Zacks Rank #3 (Hold). Other stocks that
are performing well currently are NetEase, Inc. (
), RingCentral, Inc. (
) and VeriSign, Inc. (
). All these stocks carry a Zacks Rank #2 (Buy).
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