US defence contractor Raytheon has raised US$1bn via a dual tranche senior unsecured bond offering.
The financing is split between US$575m of three-year 1.4% notes and US$425m of thirty-year 4.7% note and is due to be completed on 6 December. The…
US defence contractor Raytheon has raised US$1bn via a dual tranche senior unsecured bond offering.
The financing is split between US$575m of three-year 1.4% notes and US$425m of thirty-year 4.7% note and is due to be completed on 6 December. The three-year notes priced at 99.879% to yield 1.441% with a spread of 105bp over Treasury. The thirty-year notes priced at 99.520% to yield 4.730% with a spread of 180bp over Treasury.
Citigroup, JP Morgan, Merrill Lynch, Credit Suisse, RBS and Wells Fargo are joint book-running managers for the transaction. Barclays, BNP Paribas, Credit Agricole Securities, Deutsche Bank, Morgan Stanley and UBS are senior co-managers with ANZ and Scotia Capital co-managers.
Raytheon stated that net proceeds from the sale are to be used for general corporate purposes, in particular discretionary pension contributions. At the end of 2010, the company’s domestic pension plans were 81% funded leaving a deficit of approximately US$3.3bn.
Fitch Ratings stated that Raytheon’s required cash funding over the next two years is substantial, estimated to be around US$1bn a year. However, the company is set to receive some sizeable government contract reimbursements in the next year meaning that the net cash funding requirements over 2011 and 2012 combined should be about US$500m – US$600m.
Following the US$1bn bond offering, Raytheon will have US$4.6bn of outstanding debt. The company is unlikely to use any of the remaining proceeds to pay down some of this debt as it does not have any maturities until 2015. The company does have two revolving credit facilities, worth US$500m and US$1bn, that expire in November 2012 but is expected to extend or replace them.
For the 12 months ending 2 October 2011, Raytheon’s gross leverage was 1.1 times debt to EBITDA.
