Lexmark Inc. recently commenced a public offering of senior notes worth $400.0 million. The notes will carry an interest rate of 4.875% and are set to mature on Mar 15, 2020.
Lexmark filed for the registration with the U.S. Securities and Exchange Commission. J.P. Morgan Securities LLC (an unit of J.P. Morgan Chase & Co. (JPM - Free Report) ) and Citigroup Global Markets Inc. (an unit of Citigroup Inc. (C)) are acting as administrative agents for the purpose, along with certain other lenders. The offer will cease on Mar 4.
The raised amount (after deducting issue-related expenses) will enable Lexmark to increase fund availability and finance its continuing working capital requirements, capital expenditure, facilitate the repayment of its 5.90% senior notes due in 2013, and also fund potential acquisitions.
In a separate development, Lexmark also announced to repay its outstanding 5.90% 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.
Lexmark exited fourth quarter 2012 with $905.8 million in cash and cash equivalents, up from $859.3 million reported in the previous quarter. Lexmark has a senior notes balance of $649.6 million, which will go up another $400.0 million after this issue. Of the total senior notes outstanding, $350.0 million notes are scheduled to be repaid in the shot term. The company is also repaying 5.90% senior notes, which will bring down the total liability.
Lexmark’s fourth quarter results were not encouraging as its earnings per share (EPS) missed the Zacks Consensus Estimate by a wide margin. Revenues came below the year-ago period but were better than expected. Guidance for the first quarter was deterring, too, reflecting inkjet exit and macro uncertainty.
Though constant pricing pressure from competitors such as Canon Inc., Xerox Corp. (XRX - Free Report) and Hewlett-Packard Co. (HPQ - Free Report) is a concern, we expect Lexmark to turn the table with increased focus on software and services.
Currently, Lexmark has a Zacks Rank #3 (Hold).