The ADT Corporation (ADT - Analyst Report), an electronic security company, announced its offering of new registered notes in exchange for its previously issued outstanding unregistered notes. The exchange offer will be conducted by way of a private placement pursuant to Rule 144A and Regulation S under the Securities Act of 1933, as amended.
ADT currently has an outstanding, unregistered debt of $1 billion in aggregate principal amount issued in Oct 2013, which offers a coupon rate of 6.250% and is due 2021. Per the exchange offer, these notes will be exchanged for a new, registered issue of $1 billion notes, offering the same coupon and maturity.
The exchange offer has been made to satisfy ADT’s obligations to the holders of the unregistered notes. The issuance of the new registered debt will not generate any proceeds.
The exchange offer will terminate on May 5, 2014, unless extended, and the settlement date will follow it immediately. The offer has been made in accordance with the provisions outlined in ADT’s prospectus.
The company presently stands at the lowest tier of investment grade ranking, as it is rated BBB- by Fitch’s Ratings, indicating that the company has adequate capacity to meet financial commitments. ADT does not have any debt maturing before 2017, when $750 million of senior notes mature.
Last month, Moody's Investors Service, a leading credit rating agency, assigned a Ba2 rating to ADT’s debt issue of $500 million worth of senior unsecured notes, due 2019. A Ba2 rating implies that the company is judged to have speculative elements and a significant amount of credit risk. The proceeds from the issue were reported to be used to pay down $200 million of revolver borrowings, with the rest to be used for share repurchases and general corporate purposes.
Based in Boca Raton, FL, ADT is a leading provider of electronic security, interactive home and business automation, and related monitoring services primarily in the United States, Canada and Puerto Rico. The Company operates through a network of dealers, affinity organizations, and technology providers. ADT enjoys a strong competitive position as the chief residential security provider in the U.S. Based on company estimates, ADT currently has over 6 million customers and about 25% market share.
ADT presently holds a Zacks Rank #3 (Hold). Other better-ranked stocks in the sector include CBIZ, Inc. (CBZ - Snapshot Report), MAXIMUS, Inc. (MMM - Analyst Report) and JTH Holding, Inc. (TAX), all carrying a Zacks Rank #1 (Strong Buy).