Priceline.com (PCLN - Analyst Report) has recently announced the pricing of senior unsecured notes aggregating $1 billion, which are due to mature in 2020 through a private offering. The interest rate, conversion rate and other terms have not yet been decided. Additionally, the company authorized the repurchase of additional shares worth $1 billion of the company’s common stock.
Priceline stated that the transaction proceeds will be used to fund the expansion of the company’s $1 billion stock repurchase program. Management said that some of the proceeds would be used to repurchase shares up to $450 million in privately negotiated transactions. The net proceeds would also be used to buy back stock in the open market. The remaining amount would be used for general corporate purposes.
Priceline.com is one of the leading online travel companies in the world. In the recently concluded first quarter, the company generated $183.1 million of cash from operations and used $76.4 million to repurchase its common stock.
At quarter-end, Priceline had $936.0 million in long-term debt and $526.2 million in short term debt, totaling $1.46 billion. Currently, the company’s debt-to-total capitalization ratio is only 26.8%, which will increase after the issuance of these notes.
We believe that Priceline has a strong balance sheet, which will help the company to capitalize on investment opportunities and make strategic acquisitions, further improving its growth prospects. We believe the senior notes offering will bring down its cost of capital, thus strengthening the company’s balance sheet and supporting its future growth. Additionally, the continued share buybacks will increase investor enthusiasm for the shares.
Currently, Priceline has a Zacks Rank #3 (Hold). Other stocks that have been performing well and are worth a look include IAC/InterActive (IACI - Snapshot Report), Overstock.com and PetMed Express (PETS - Analyst Report), all carrying a Zacks Rank #1 (Strong Buy).