US satcoms systems developer Kratos Defense & Security Solutions has abandoned plans to refinance US$625m of senior notes due 2017 because of market conditions.
The national security technology group said upfront and recurring payments to refinance the…
US satcoms systems developer Kratos Defense & Security Solutions has abandoned plans to refinance US$625m of senior notes due 2017 because of market conditions.
The national security technology group said upfront and recurring payments to refinance the bond, which has a ‘no call’ provision until the end of May 2014, did not meet its goal to reduce overall costs.
CEO Eric DeMarco said: “Following exploration of current market conditions, and even though investor interest was strong, we have made the decision not to consummate a transaction at this time, as the overall cost and financial rate of return to our company would not achieve our pre-determined financial objectives.”
He said the group will continue to watch the market as it considers the cost of potentially refinancing its existing senior notes.
As well as satcoms, Kratos provides mission critical products for areas ranging from missile defence to cybersecurity. It has a primarily engineering and technically oriented workforce of around 3,850.
Despite its focus on the US government and a challenging budgetary and industry environment, Standard and Poor’s and Moody’s recently reaffirmed their respective B and B3 ratings for the company.
DeMarco said the ratings agencies noted Kratos’ position “in relatively high-priority areas of the defence budget”, and that its product portfolio is positioned in areas where funding levels are less vulnerable.
The group is forecasting roughly 10% sequential organic revenue and adjusted EBITDA growth for its Q4 2013.
For Q3 2013, Kratos reported US$226.4m in sales and adjusted EBITDA of US$24m, down 18% and 30%, respectively, compared with the corresponding period the year before as it was impacted by the US government shutdown on 1 October 2013.
However, DeMarco pointed to comments made late last week by House Speaker Boehner, who said another government shutdown will not happen and that the House intends to pass another ‘Continuing Resolution’ if the US Budget Committee is unable to agree a deal by 13 December.
