Aerospace contractor and communications systems developer L-3 Communications has raised US$1bn through a dual tranche senior unsecured bond offering.
The company issued US$350m of 1.5% three-year notes and a US$650m 10-year bond. The transaction was…
Aerospace contractor and communications systems developer L-3 Communications has raised US$1bn through a dual tranche senior unsecured bond offering.
The company issued US$350m of 1.5% three-year notes and a US$650m 10-year bond. The transaction was heavily oversubscribed, with the combined order book believed to be almost US$9bn.
Merrill Lynch, Barclays Capital, SunTrust Robinson Humphrey, Deutsche Bank, Mitsubishi UFJ, Scotia Capital, US Bancorp and Wells Fargo Securities are joint book-running managers on the financing, which is expected to settle on 28 May.
L-3 stated that a portion of the net proceeds will be used to fund the redemption of the US$689.4m outstanding of 3% convertible contingent debt securities (CODES) held by its subsidiary L-3 Communications Holdings. The remainder will be used for general corporate purposes.
Though the CODES are not due until August 2035, L-3 is looking to get rid of all of its convertible securities and replace them with more traditional bond debt. The company’s management has outlined a cash deployment strategy that focuses on dividends and share repurchases and CODES are seen as an impediment to this.
In addition, the conversion rate of the securities is 11.2259 shares of common stock per US$1,000 aggregate principal amount of CODES. This equates to a conversion price of approximately US$89.08 per share, a substantial discount to L-3’s current share price of US$114.55.
The Bank of New York Mellon is the trustee, paying agent and conversion agent for the redemption.
On completion of the bond offering, L-3’s total debt will increase by US$300m to approximately US$3.9bn. This will push its leverage up to 2.7 times debt to EBITDA but still within investment grade.
L-3 has no debt maturities this year or the next, with the next material debt maturity in 2016 when US$500m of 3.95% senior unsecured notes are due.
