Arrow Buys Back Debt

Arrow Electronics (ARW - Analyst Report) recently agreed to sell its $300 million aggregate principal 6% notes due Apr 1, 2020. The company expects to close the transaction on Sep 30, 2009. Management plans to use the proceeds for general corporate purposes and for the repurchase of its existing 9.15% Senior Notes due 2010.

Earlier, the company commenced a fixed price cash tender offer for its outstanding $200 million aggregate principal 9.15% Senior Notes due 2010. The company is offering cash for the principal and interest due on the notes.

The company generated $300 million of cash from operating activities in the second quarter of 2009. As of Jul 4, 2009, the company had a total debt of $1261.0 million and cash and equivalents of $908.4 million.

The company reported weak results for the second quarter due to the weakening demand. Electronic distributors have been hit hard by the global slowdown, which continues to hurt the technology supply chain. Although both bookings and billings showed an increase for the second quarter, and backlog is up for the first time in several quarters, rival Avnet Inc. (AVT - Analyst Report) and Arrow maintain that the deteriorating top line is yet to find a bottom, and visibility still remains limited. In particular, business conditions in Europe remain challenging.

Business momentum is still muted and revenue growth and margin expansion are a few quarters away. New York-based Arrow Electronics is one of the world’s largest distributors of electronic components and computing products. The company sources products from about 800 suppliers and distributes them to over 130,000 customers (original equipment manufacturers, contract manufactures and commercial customers).

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