Shares of Domino's Pizza Inc. rose in trading Monday following the pizza chain's announcement that it has completed a recapitalization plan and is issuing a special dividend.
THE SPARK: Domino's said late Friday that it had completed a recapitalization plan, which included the placement of a $1.675 billion debt facility. That replaces an earlier higher-interest debt facility. It also said it is issuing a $3 per share special dividend in April.
THE BIG PICTURE: The company stands to benefit from lower interest rates under the new debt facility.
The private placement deal includes $1.575 billion of senior fixed notes and $100 million of variable funding senior notes. The company plans to use the proceeds to repay outstanding notes and accrued interest. The remainder will be used to help pay for the dividend.
Domino's also helped build shareholder confidence with the announcement of the special dividend and saying that it may buy back more of its shares in the future. It has $82.3 million remaining under an existing $200 million repurchase program.
THE ANALYSIS: Barclays Capital analyst Jeffrey Bernstein said while the recapitalization provides a lower interest rate and special dividend, the costs of the process may outweigh the benefit of a lower rate. Bernstein also noted that Domino's shares were already ripe for a possible $1 to $2 dividend before this news. He reiterated an "Equal Rate" rating on the company.
SHARE ACTION: Shares of Domino's increased $1.40, or 3.5 percent, to $41.36 in afternoon trading Monday after rising to a 52-week high of $42.21 earlier in the session.
- special dividend