Global data-center service provider Equinix Inc. EQIX recently announced plans of its public offering of €1 billion aggregate principal amount of senior notes. The notes are slated for maturity in 2028. The company has filed for registration under the Securities Act of 1933.
JPMorgan Chase & Co. JPM, Citigroup C, BofA Merrill Lynch, MUFG and RBC Capital Markets are acting as joint book-running managers for the purpose. Equinix, along with the joint book-running managers, will determine the interest rate and offer price. The offering will be “made under an automatic shelf registration statement on Form S-3 filed with the Securities and Exchange Commission (the "SEC") on November 7, 2017”, the company stated in its press release.
Equinix intends to use the entire proceeds from the planned offering, along with nearly $10 million of available cash, for repaying its existing €995 million term loan due 2024.
Notably, this will be the company’s third senior notes offering this year. Prior to this, Equinix had commenced offerings worth €1.0 billion in September and $1.25 billion in March.
Borrowing costs continue to be low, enabling companies to obtain easy financing. With the U.S. treasuries offering low rates, corporate bonds and borrowings from banks are now witnessing elevated demand. We believe these notes will provide financial flexibility to the company and propel long-term growth as well.
Nonetheless, escalating interest expenses due to increased debt burden may dampen the company’s profitability. It should be noted that at the end of third-quarter 2017, Equinix had cash, cash equivalents and short-term investments of $1.629 billion, while the total debt principal outstanding was $10.12 billion as of Sep 30, 2017.
The company’s share price movement has been quite favorable. Over the past year, its shares have returned 33.2%, while the industry recorded growth of 13.1%. Currently, Equinix carries a Zacks Rank #3 (Hold).
A better-ranked stock in the broader technology sector is NVIDIA Corporation NVDA, sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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