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Nasdaq (NDAQ) Announces $500 Million Senior Notes Offering

Zacks Equity Research

Nasdaq Inc. NDAQ has priced a new debt offering of $500 million worth 3.850% senior notes. This dollar-denominated offering is due to mature in 2026.

The company plans to use the proceeds from these offerings as well as current cash on hand and/or borrowings under its senior credit facility to fund the cash component and other expenses payable it to acquire 100% equity interests in U.S. Exchange Holdings, Inc. The remaining proceeds, if any, will be utilized for general corporate purposes.

The company’s move to capitalize on the current low interest rates environment to issue debt is undoubtedly a prudent one. Given the low interest rate environment, the company is consciously making efforts to reduce its interest burden on borrowings, which is facilitating margin expansion. Nasdaq had announced a Euro-denominated 1.75% senior notes offering worth $669 million in May this year.

Nasdaq boasts good credit ratings and currently enjoys a positive outlook from most credit agencies for its debt obligations.

As of Mar 31, 2016, the company’s debt obligations were $2.6 billion compared with $2.4 billion at year-end 2015. This reflects an 8.3% increase. The debt-to-equity ratio was 0.46x at the end of Mar 31, 2016 as against 0.43x at year-end 2015. Following the issuance of both Euro-denominated and U.S. Dollar denominated senior notes worth a total $1.2 billion, the debt-to-equity ratio will increase 2000 basis points to 0.66x.

Zacks Rank and Stocks to Consider

Currently, Nasdaq carries a Zacks Rank #3 (Hold). Somefinance and investment management stocks which could be considered in the industry include Affiliated Managers Group Inc.AMG, Eagle Point Credit Company Inc. ECC and GAMCO Investors Inc.GBL all with a Zacks Ranks #2 (Buy).

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