Global Payments Inc. GPN recently completed a new senior unsecured term loan and an unsecured revolving credit facility worth $2 billion and $3 billion, respectively, on Jul 9, 2019. This is related to its prior announced merger with Total System Services, Inc. TSS.
The facilities can be used for borrowing on the date the merger becomes effective. The same is also estimated to substitute Global Payments’ current secured credit facilities and Total System’s unsecured revolving credit facility.
Per the terms, the present interest rate margin applicable to Global Payments’ current facilities is projected to decrease 12.5 basis points, subject to certain adjustments. Notably, the $3-billion revolving credit facility reflects an increase of $1.5 billion from its current revolver strength.
Moreover, these facilities will mature five years after the effective merger date. This combined capital structure is expected to provide adequate cushion required by the business once the merger is in force. Global Payments currently has a debt to equity ratio of 128%, higher than the industry average of 63%. Its interest coverage ratio stands at 3.81, lower than its industry’s average of 45.56. The leverage is expected to increase after the issue of these new facilities.
This transaction will provide Global Payments with a significant exposure to the fast-growing markets, globally, with physical and virtual presence in more than 100 countries. The company will be able to better serve its customers via cutting-edge technology solutions, focused on small and medium business customers and premier financial institutions, internationally. Post the deal, which is likely to close by the end of 2019, Global Payments expects adjusted net revenues plus network fees of nearly $8.6 billion and adjusted EBITDA of nearly $3.5 billion. The deal will also fetch in at least $300 million in annualized run-rate cost synergies with majority driven by significant areas of overlap.
Shares of this Zacks Rank #3 (Hold) company have rallied 40.7% in a year’s time, outperforming its industry’s growth of 26%.
Investors interested in the same space might take a look at some better-ranked stocks, such as Green Dot Corporation GDOT and Visa Inc. V, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Green Dot works as a financial technology and bank holding company in the United States. It came up with average four-quarter beat of 17.5%.
Visa works as a payments technology company worldwide. It pulled off average four-quarter positive surprise of 5.4%.
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Total System Services, Inc. (TSS) : Free Stock Analysis Report
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