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Iron Mountain Upsizes Notes Offering to $2.4M, To Repay Debt

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Iron Mountain Incorporated (IRM - Free Report) upsized and priced its private placement offering of senior notes by $600 million in aggregate principal to $2,400 million.

Earlier, the company offered 5% senior notes due 2028 and 5.250% senior notes due 2030, with an aggregate principal amount of $500 million and $1,300 million, respectively.

With the addition of a third series of notes offering — 5.625% senior notes due 2032 with $600 million of aggregate principal amount — the company increased its bond issuance from $1,800 million to $2,400 million.

Iron Mountain plans to utilize net proceeds from the offering to repay part of the amounts outstanding under its revolving credit facility. Further, the company intends to redeem its entire $500-million 4.375% senior notes maturing next year, 6% senior notes due 2023 with aggregate principal amount of $600 million, and $1 billion of its 5.750% senior subordinated notes expiring in 2024.

The company’s efforts to strengthen its liquidity in these testing times and tap the debt market amid a low interest-rate environment are a strategic fit.

In fact, it has reduced capital investments both for capital expenditure as well as merger and acquisition by a net total of $110 million to enhance liquidity amid the potential disruption related to the COVID-19 pandemic. Moreover, as of the first-quarter end, the company had more than $1.2 billion in liquidity, consisting of cash on hand of $153 million and $1.1 billion available under its revolving credit facility.

Hence, with decent financial flexibility and reduction of expected cash outflows, the company is well-poised to continue its daily operations and pursue growth endeavors.

However, the pandemic has led to numerous shutdowns and an increase in remote-working policies across companies, resulting in a slowdown in Iron Mountain’s service business. In fact, the company witnessed a year-over-year decline of 45-50% in April retrieval and refile activity. Further, in its secure destruction segment, shred pickup activity in April witnessed a year-over-year decline of 25-30% due to limited pickups. Accordingly, the company expects a 40% year-over-year decline in second-quarter service activity.

Moreover, shares of this Zacks Rank #3 (Hold) company have lost 14.5% over the past year compared with the industry’s decline of 5%.

 


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Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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