Oracle Corporation (ORCL - Free Report) recently announced the pricing of senior unsecured notes aggregating $14 billion. These bonds have been issued in five tranches of varying amounts with different interest rates and maturity dates. The offering is expected to close on Jul 7, 2016, subject to customary closing conditions.
Management intends to use the net proceeds for general corporate purposes. These may include share repurchases, debt repayment, acquisitions, or dividends payments.
Moody’s Investor Services, the credit rating agency of Moody’s Corporation (MCO - Free Report) , has assigned an “A1” rating to these proposed notes. The company however revised its outlook to negative from stable.
The negative outlook is due to concerns pertaining to increased debt balance, which Moody’s expects to go beyond $50 billion with the aforementioned issuance of notes.
Though Oracle has a strong cash balance ($56.1 billion as of May 31, 2016) and healthy cash flow, Moody’s remains cautious as a sizeable portion of the company’s cash is parked offshore and the company might have to issue more debt in the future to meet its domestic cash needs.
Oracle carries a Zacks Rank #3 (Hold). A couple of better-ranked stocks in the sector include Internap Corporation (INAP - Free Report) and Castlight Health, Inc. (CSLT - Free Report) , each carrying a Zacks Rank #2 (Buy).
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