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Nasdaq (NDAQ) Prices 3 Tranches of Senior Notes Worth $1.9B

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Nasdaq (NDAQ - Free Report) announced the pricing of $1.9 billion aggregate principal amount of senior unsecured notes in three tranches. The $600 million notes carry an interest rate of 0.445% and are scheduled to mature in 2022, the $650 million notes carry an interest rate of 1.650% and are scheduled to mature in 2031 and the $650 million notes carry an interest rate of 2.500% and are scheduled to mature in 2040.

The company intends to deploy the net proceeds along with cash on hand and proceeds of other debt to fund the cash portion of the Verafin Holdings buyout. The proceeds should also be deployed for repaying certain outstanding indebtedness of Verafin and its subsidiaries and related expenses as well as for general corporate purposes.

The company displayed prudence by issuing senior notes amid a low interest rate environment to procure funds and enhance financial flexibility without affecting liquidity. As of Sep 30, 2020 Nasdaq’s cash and cash equivalents more than doubled year over year and increased about 22% from 2019 end level.  

By capitalizing on the low interest rate environment, the company is also attempting to reduce its interest burden, thus facilitating margin expansion. Interest expenses dropped 21.6% in the first nine months of 2020. Net margin too expanded through the first nine months of 2020. Moreover, its times interest earned, the measure of a company's ability to meet its interest payments, is 12.6, comparing favorably with the industry average of 12.4.

However, as of Sep 30, 2020, long term debt of the company was about $3.6 billion, up 19.2% from 2019 end. Debt-to-equity ratio of 59.4 deteriorated 630 basis points from 2019 end. The issuance of new debt will deteriorate leverage by 3160 basis points.

Nonetheless, Nasdaq boasts a healthy balance sheet and cash position along with modest operating cash flow from its diverse business model. While the company increased cash reserves and sought to eliminate near-term maturities, it issued a $500 million 30-year bond and repaid all commercial paper and borrowings under its revolver. This helped to lower leverage while improving its available liquidity.

Shares of this Zacks Rank #3 (Hold) leading provider of trading, clearing, marketplace technology, regulatory, securities listing, information and public and private company services have rallied 20% year to date compared with the industry’s increase of 7.9%.

Stock to Consider

Some better-ranked stocks from the finance sector include MarketAxess Holdings (MKTX - Free Report) , PJT Partners (PJT - Free Report) and Mvb Financial (MVBF - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

MarketAxess surpassed estimates in each of the last four quarters, with the average earnings surprise being 2.71%.

PJT Partners surpassed estimates in two of the last four quarters, with the average earnings surprise being 42.38%.

Mvb Financial surpassed estimates in two of the last four quarters, with the average earnings surprise being 210.55%.

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