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Dow (DOW) Completes Senior Notes Offering Worth $2 Billion

Zacks Equity Research
·3 mins read

Dow Inc.’s DOW fully-owned subsidiary, The Dow Chemical Company, stated that it has completed the public offering of $2 billion total principal amount of its notes. The Dow Chemical Company has issued $1.15 billion of its 3.6% notes due 2050 and $850 million of its 2.1% notes due 2030.

The company will employ the net proceeds to fund the redemption of debt. This includes the repayment of up to $1.25 billion principal balance outstanding per the term loan facility of the Dow Chemical Company’s full-owned subsidiary, Dow Silicones Corporation. The company will also use the proceeds to finance the cash tender offers to acquire some of its debt securities and certain debt securities of another subsidiary of the Dow Chemical Company, Union Carbide Corporation, in a total purchase price (excluding accrued interest) of up to $550 million.

Notably, Dow’s long-term debt was $16,288 million at the end of the second quarter. The company also repaid around $600 million of debt in the quarter.

Dow’s shares lost 15.3% year to date compared with 6.6% decline recorded by the industry.  

In July, Dow stated that it sees a gradual and uneven recovery based on what it has witnessed in the second quarter and in July. The company noted that its structural cost improvements coupled with disciplined approach to cash generation and capital allocation will help it capture significant value as markets recover.

Dow further noted that it will increase its operating expense reduction target for 2020 to $500 million from $350 million through additional structural cost actions. It will initiate a restructuring program, aiming more than $300 million in annualized EBITDA benefit by the end of next year. This includes a 6% reduction in its global workforce and actions to exit uncompetitive assets.

Zacks Rank & Key Picks

Dow currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the basic materials space include Golden Star Resources Ltd. GSS, Eldorado Gold Corporation EGO and Yamana Gold Inc. AUY, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Golden Star Resources has an expected earnings growth rate of 12.5% for 2020. The company’s shares have surged 60% in the past year.

Eldorado Gold has an expected earnings growth rate of 2,325% for 2020. Its shares have returned 16.1% in the past year.

Yamana has an expected earnings growth rate of 76.9% for 2020. The company’s shares have soared 66% in the past year.

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