QVC Inc., a wholly owned subsidiary of
Liberty Interactive Corporation
), has announced to offer senior secured debts and expects to
generate net proceeds of $500 million. We believe that the proceeds
from the senior debt will be used to partly reduce the company's
high leverage position.
The senior debt is expected to carry an interest rate of 5.125%
and is due for payment in 2022. The debt issuance is backed by the
same collateral which secures QVC's existing and future credit
facility. The notes will be offered only to qualified institutional
buyers outside the U.S. who are exempted from the registration
requirements of the securities act.
Liberty Interactive Corporation exited the first quarter of 2012
with an enormous amount of long-term debt. The company has $6,183
million of outstanding debt and further issuance of debt could
raise its debt position. At the end of the first quarter of 2012,
Liberty Interactive had 2,137 million of cash and marketable
securities. Going forward, the mounting interest will lead to
higher interest payment for the company, thus impacting its
QVC, the most prestigious unit for Liberty Interactive, is the
undisputed market leader in the $8 billion TV home-shopping
business. Currently, QVC commands an estimated 69% market share,
far ahead of its nearest rivals,
ValueVision Media Inc.
) and others. It is expected that QVC will continue to leverage its
brand to rapidly grow its internet operations. Exposure to
international markets, such as Japan, Germany, Italy, and the U.K.
will enable QVC to achieve a higher rate of growth.
QVC is gradually expanding its presence in these developed
markets. However, expansion in these markets requires continuous
investment. We believe that the company is issuing this senior debt
to continue its expansion plans and at the same time pay back its
existing credit obligations. Standard and Poor's Rating Services
has issued a 'BBB' rating for the senior debts as they believe that
the company will continue to perform steadily over the intermediate
We are maintaining our long-term Neutral recommendation on
Liberty Interactive Corporation. Currently, Liberty Interactive
Corporation has a Zacks #3 Rank, implying a short-term hold rating
on the stock.
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