Arrow Inc. (ARW - Free Report) recently commenced an offering of senior unsecured notes worth $600.0 million in two parts. Arrow filed for registration with the U.S. Securities and Exchange Commission. Merrill Lynch and J.P. Morgan Securities LLC will be acting as administrative agents, along with certain other lenders.
The first part of the notes offering will raise $300.0 million, carrying an interest rate of 3.0%. The notes will mature on Mar 1, 2018. The second part of senior notes worth $300.0 million carries an interest rate of 4.5%. These notes will mature in 2023.
The raised amount will enable Arrow to pay back its notes scheduled in Jul 2013. The notes carry an interest of 6.875%. Also, the fund will help the company to increase fund availability, finance its continuing working capital requirements, capital expenditure and also fund potential acquisitions.
In a separate development, Arrow announced to repay its outstanding 6.875% senior notes scheduled in Mar 2013. The redemption price will consist of a premium and any accrued or unpaid interest due till the day before maturity date.
As of Dec 31, 2012, the company had 6.875% senior notes worth $335.4 million. Following the recent issuance, the senior notes balance will go up by an additional $600.0 million. But the consequent repayment of senior notes issued earlier will neutralize the debt to some extent.
Arrow exited the fourth quarter of 2012 with $409.7 million in cash and cash equivalents, up from $358.5 million reported in the previous quarter. Cash generated from operations was $187.8 million compared with $176.3 million generated in the prior quarter. This indicates good liquidity position of the company, which can boost lender confidence.
Overall, Arrow’s performance was decent in the second quarter with the bottom line surpassing the Zacks Consensus Estimate. Like the previous quarter, revenues witnessed a year-over-year decline, but the rate of decline moderated. First-quarter guidance was disappointing reflecting macro concerns.
However, the company’s positive commentary about enhanced productivity, annual cost savings and successful ERP (Enterprise Resource Planning) system implementation across Europe is encouraging. We believe that Arrow could get better contribution from Europe as soon as the ERP program becomes operational.
We are also encouraged by Arrow’s recent deal wins. In the past two weeks, the company signed distribution agreements with SAP AG’s (SAP - Free Report) American arm and Lantronix Inc. (LTRX - Free Report) .
Currently, Arrow has a Zacks Rank #3 (Hold). Its archrival Avnet Inc. (AVT - Free Report) , which posted decent second-quarter 2013 results, has a Zacks Rank #1 (Strong Buy).