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ADT to Revise Debt Profile, Prices $600M Notes Offering

Zacks Equity Research

ADT Inc. ADT yesterday announced the pricing of $600 million worth of first-priority senior secured notes. It is worth noting here that Prime Security Services Borrower, LLC and Prime Finance Inc.  — indirect wholly-owned subsidiaries of ADT — are the issuers of these senior notes.

It is worth mentioning here that this offering represents a $100-million hike from the $500-million offering announced on Sep 12. In addition, the company recently announced about making some changes in its available credit agreement.

Inside the Headlines

As mentioned, notes offered are due to expire in 2026 and carries coupon rate of 5.750%. The offering will close on Sep 23, 2019. With regard to amendment to its credit agreement, the company anticipates incurring new term loan of approximately $3,110 million (lower than $3,210 million mentioned earlier).

Funds raised from notes offering, the new term loan and revolving credit facilities will be used by ADT for refinancing term loan (due to mature 2022) worth $3,414 million. Also, the company may use part of these funds for redeeming $300 million of notes due 2020 and pay for fees and other expenses related to the above-mentioned transactions.

We believe that offerings of senior notes will increase ADT’s debts and in turn, might inflate its financial obligations and hurt profitability. However, measures relating to redeeming notes will be a relief.

ADT’s Debt Profile

It is worth mentioning here that the company's long-term debt at the end of the second quarter stood at $9,481 million.

In April 2019, ADT completed offerings of $750 million worth of 5.250% first-priority senior secured notes due to mature in 2024 and $750 million worth of 5.750% first-priority senior secured notes due to mature in 2026.

Gross proceeds of $1,500 million along with cash and revolving credit facility were used by the company to repay term loan worth $500 million, buy back $1,000 million worth of 9.250% second-priority senior secured notes due 2023, and pay transaction-related fees and expenses.

Zacks Rank and Stocks to Consider

With a market capitalization of approximately $4.4 billion, ADT currently carries a Zacks Rank #5 (Strong Sell). In the past 60 days, the Zacks Consensus Estimate for its earnings has declined 1.1% to 87 cents for 2019 and 2.9% to $1.01 for 2020.

ADT Inc. Price and Consensus

 

ADT Inc. Price and Consensus

ADT Inc. price-consensus-chart | ADT Inc. Quote

The company’s share price has decreased 6.5% in the past three months against the industry’s growth of 3.4%.




Three better-ranked stocks in the industry are Brady Corporation BRC, Lakeland Industries, Inc. LAKE and Johnson Controls International plc JCI. All these stocks currently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In the past 60 days, earnings estimates have improved for these stocks for the current year. Further, average earnings surprise in the last four quarters was positive 9.68% for Brady, 325.89% for Lakeland Industries and 4.54% for Johnson Controls.

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