NCR Issues $500M Senior Notes


NCR Corp. (NCR) recently commenced an offering of senior unsecured notes worth $500.0 million, to institutional buyers in the U.S. The notes will mature in 2022, though the rate of interest was not disclosed.

The notes have been assigned a “Ba2“ rating by Moody’s Corp. (MCO). The rating indicates that the obligator could meet its financial obligations like short-term debt. The credit ratings act as financial indicators for potential investors.

The raised amount will enable NCR to increase fund availability and finance its continuing working capital requirements, pension-related expenses, offering-related expenses and capital expenditure, while at the same time facilitating the repayment of its senior secured notes.

As of June 30, 2012, NCR had a total debt balance of $740.0 million, down from $827.0 million in the prior quarter. The senior notes balance at the end of the second quarter was $5.0 million, flat sequentially.

NCR exited the second quarter with $377.0 million in cash and cash equivalents, down from $414.0 million reported in the previous quarter. During the quarter, debt-capitalization ratio improved to 43.0%, from 48.5% in the previous quarter.

Following the recent issuance, the senior notes balance will go up by an additional $500.0 million. This will impact the debt capitalization ratio to some extent in the coming quarters. Also, the raised debt burden will have an impact on its interest charges. The interest expense in the second quarter was $8.0 million or 5 cents per share, which is quite significant.

Overall, NCR’s performance was decent in the second quarter with the bottom line surpassing the Zacks Consensus Estimate. The company’s Financial Services segment performed well, while other segment results were weak. However, the company seems positive about its performance in fiscal 2012.

We remain positive about NCR’s deal wins from various industrial sectors. But, a high debt burden, European exposure and stiff competition from Diebold Inc. (DBD) and Wincor Nixdorf in the ATM market keep us concerned.

Currently, NCR has a Zacks #3 Rank, implying a short-term Hold rating.

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