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ADT Prices $1.3B Notes Offering, To Repay Debts With Proceeds

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ADT Inc. (ADT - Free Report) yesterday announced the pricing of $1,300 million worth of second-priority senior secured notes. Notably, Prime Security Services Borrower, LLC and Prime Finance Inc.  — indirect wholly-owned subsidiaries of ADT — are the issuers of these senior notes.

It is worth mentioning here that the company made the offering to refinance its existing debts.

Inside the Headlines

As mentioned, notes offered are due to expire in 2028 and carry a coupon rate of 6.25%. Subject to the fulfillment of certain conditions, the offering will close on Jan 28, 2020. Notably, the notes offered do not require to be registered under the Securities Act.

ADT will use funds raised from the notes offering along with borrowings under revolving credit facilities and cash on hand to redeem $1,246 million of 9.250% notes due 2023, and pay for fees and other expenses related to the transactions.

We believe that offerings of senior notes will increase the company’s debts and in turn, might inflate its financial obligations and hurt profitability. However, measures relating to redeeming notes will be a relief.

ADT’s Debt Profile

The company's long-term debt at the end of the third quarter of 2019 stood at $9,638 million. Notably, its proceeds from long-term borrowings totaled $3,378 million in the first nine months of 2019, while long-term borrowing repayments amounted to $3,650 million.
In September 2019, ADT completed the offerings of $600 million worth of 5.750% first-priority senior secured notes due to expire in 2026.

The company used gross proceeds of $612 million along with cash, revolving credit facility and others to refinance term loan (due to mature 2022) worth $3,414 million. Also, it may use part of these funds for redeeming $300 million of 5.250% first-priority senior secured notes due to expire in 2020, and pay for fees and other expenses related to the transactions.

Zacks Rank and Stocks to Consider

With a market capitalization of $4.8 billion, ADT currently carries a Zacks Rank #3 (Hold). In the past 60 days, the Zacks Consensus Estimate for its earnings has been unchanged at 98 cents per share for 2019 (results are awaited) and $1.00 for 2020.

ADT Inc. Price and Consensus


ADT Inc. Price and Consensus

ADT Inc. price-consensus-chart | ADT Inc. Quote

The company’s share price has decreased 12% in the past three months against the industry’s growth of 6.8%.

Stocks to Consider

Three better-ranked stocks in the Zacks Industrial Products sector are DXP Enterprises, Inc. (DXPE - Free Report) , Cintas Corporation (CTAS - Free Report) and Parker-Hannifin Corporation (PH - Free Report) . While DXP Enterprises currently sports a Zacks Rank #1 (Strong Buy), Cintas and Parker-Hannifin carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

In the past 60 days, earnings estimates for these stocks have improved for the current year. Further, positive earnings surprise for the last four quarters, on average, was 17.67% for DXP Enterprises, 8.50% for Cintas and 5.29% for Parker-Hannifin.

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