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Equinix Offers $1.5B Senior Notes

Zacks Equity Research

Global data center service provider Equinix Inc. (EQIX) recently commenced a public offering of senior notes worth $1.5 billion in two parts. Management stated that this is an enhancement of the previously announced $1.0 billion offering. Equinix filed for the registration with the U.S. Securities and Exchange Commission. J.P. Morgan Chase & Co. (JPM), Barclays plc (BCS), Citigroup Inc. (C), BofA Merrill Lynch and Deutsche Bank Securities are acting as administrative agents for the purpose, along with certain other lenders. The offer will cease on Mar 5.

The first part of the notes offering will raise $500.0 million, carrying an interest rate of 4.875%. The notes will mature on Apr 1, 2020. The second part of the senior notes offering worth $1.0 billion carries an interest rate of 5.375%. These notes will mature on Apr 1, 2023. The interest will be rewarded semi-annually.

The raised amount (after deducting issue-related expenses) will enable Equinix to increase fund availability and finance its continuing working capital requirements, capital expenditure, facilitate the repayment of its 8.125% convertible subordinated notes due in 2018, and also fund the procedure for REIT (Real Estate & Investment Trust) conversion and potential acquisitions.

Equinix already has a senior notes balance of $1.5 billion, which will go up another $1.5 billion after this issue. However, the repayment of convertible notes will bring down the total liability.

Equinix exited fourth quarter 2012 with $418.7 million in cash and cash equivalents, up from $404.5 million reported in the previous quarter. It bears a total debt (loans payable, senior notes plus convertible debt) of $2.45 billion, down from $2.70 billion in the previous quarter. This indicates regular repayment of debts, which could be pretty attractive for the lenders.

Though Equinix’ future growth prospects and REIT conversion is encouraging, high debt burden, European exposure and competitive threats from the likes of AT&T Inc. and Verizon Inc.  keep us concerned.

Currently, Equinix has a Zacks Rank #3 (Hold).

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