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Graphic chip behemoth NVIDIA Corp.(NVDA - Free Report) announced the pricing of an unsecured senior notes offering worth $2 billion. The offering, which will be made in two tranches, is likely to close on Sep 16.
The first tranche of the notes offering, with an interest rate of 2.20%, will raise $1 billion, and is scheduled to mature in 2021. The second part, worth another $1 billion and carrying an interest rate of 3.20%, is slated to mature in 2026.
Joint book-running managers for the offering are Goldman, Sachs & Co., Morgan Stanley & Co. LLC and Wells Fargo Securities, LLC.
Borrowing costs continue to be low, enabling companies to obtain easy financing. With U.S. treasuries are offering low rates, corporate bonds and borrowings from banks are now witnessing high demand. We believe that these notes will provide financial flexibility to the company and propel long-term growth.
NVIDIA intends to use the proceeds from the offering for the repayment of the principal amount of its 1.0% convertible senior notes due 2018. The notes were issued on Dec 2, 2013 and were worth $1.50 billion.
According to NVIDIA’s last 10-K filed on Mar 17, 2016, “As of January 31, 2016, the Notes became convertible at the holders’ option beginning February 1, 2016 and ending May 1, 2016. As such, $1.41 billion of the carrying value of the Notes was reclassified from long-term debt to short-term debt and $87 million was reclassified from shareholders’ equity to convertible debt conversion obligation in our Consolidated Balance Sheet as of January 31, 2016.”
As a result, in its latest quarterly results, the convertible senior notes obligation was shown as short-term debt, which stood at $1.428 billion.
After repaying this obligation, the remaining proceeds from the offerings will be used for general corporate purposes, such as returning capital through share buyback and dividend payments.
It should be noted that in the last two and a half years, NVIDIA has returned approximately $2 billion to its shareholders through share buyback and dividend payments. Furthermore, in fiscal 2017, the company intends to return $1 billion to its shareholders.
We believe that NVIDIA’s strong cash flow generation ability as well as the availability of other credit facilities will help achieve this target. The company exited the last reported quarter with cash, cash equivalents and marketable securities of $4.88 billion, compared with $4.75 billion in the previous quarter. Free cash flow in the quarter came in at $151 million, while cash flow from operations was $184 million.
Interested in IPOs? Check out the special edition of Zacks Friday Finish Line below, where Editor Maddy Johnson and Content Writer Ryan McQueeney interview Kathleen Smith of Renaissance Capital about the IPO market in 2016 (see part two here).
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NVIDIA Prices Unsecured Senior Notes Offerings worth $2B
Graphic chip behemoth NVIDIA Corp. (NVDA - Free Report) announced the pricing of an unsecured senior notes offering worth $2 billion. The offering, which will be made in two tranches, is likely to close on Sep 16.
The first tranche of the notes offering, with an interest rate of 2.20%, will raise $1 billion, and is scheduled to mature in 2021. The second part, worth another $1 billion and carrying an interest rate of 3.20%, is slated to mature in 2026.
Joint book-running managers for the offering are Goldman, Sachs & Co., Morgan Stanley & Co. LLC and Wells Fargo Securities, LLC.
Borrowing costs continue to be low, enabling companies to obtain easy financing. With U.S. treasuries are offering low rates, corporate bonds and borrowings from banks are now witnessing high demand. We believe that these notes will provide financial flexibility to the company and propel long-term growth.
NVIDIA intends to use the proceeds from the offering for the repayment of the principal amount of its 1.0% convertible senior notes due 2018. The notes were issued on Dec 2, 2013 and were worth $1.50 billion.
According to NVIDIA’s last 10-K filed on Mar 17, 2016, “As of January 31, 2016, the Notes became convertible at the holders’ option beginning February 1, 2016 and ending May 1, 2016. As such, $1.41 billion of the carrying value of the Notes was reclassified from long-term debt to short-term debt and $87 million was reclassified from shareholders’ equity to convertible debt conversion obligation in our Consolidated Balance Sheet as of January 31, 2016.”
As a result, in its latest quarterly results, the convertible senior notes obligation was shown as short-term debt, which stood at $1.428 billion.
After repaying this obligation, the remaining proceeds from the offerings will be used for general corporate purposes, such as returning capital through share buyback and dividend payments.
It should be noted that in the last two and a half years, NVIDIA has returned approximately $2 billion to its shareholders through share buyback and dividend payments. Furthermore, in fiscal 2017, the company intends to return $1 billion to its shareholders.
We believe that NVIDIA’s strong cash flow generation ability as well as the availability of other credit facilities will help achieve this target. The company exited the last reported quarter with cash, cash equivalents and marketable securities of $4.88 billion, compared with $4.75 billion in the previous quarter. Free cash flow in the quarter came in at $151 million, while cash flow from operations was $184 million.
NVIDIA CORP Price
NVIDIA CORP Price | NVIDIA CORP Quote
Zacks Rank & Key Picks
NVIDIA sports a Zacks Rank #1 (Strong Buy). A few equally ranked stocks in the broader technology sector are Ambarella, Inc. (AMBA - Free Report) , Broadcom Limited (AVGO - Free Report) and Cirrus Logic Inc. (CRUS - Free Report) . You can see the complete list of today’s Zacks #1 Rank stocks here.
Interested in IPOs? Check out the special edition of Zacks Friday Finish Line below, where Editor Maddy Johnson and Content Writer Ryan McQueeney interview Kathleen Smith of Renaissance Capital about the IPO market in 2016 (see part two here).
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>