Technology licensing company Rambus Inc. (RMBS) recently commenced a public offering of unsecured senior notes worth $120.0 million. The notes will carry an interest rate of 1.125% and are set to mature in 2018. The notes will be issued to institutional investors through a private placement and the offer will cease on Aug 16.
The raised amount (after deducting issue-related expenses) will enable Rambus to increase fund availability and finance its continuing working capital requirements, capital expenditure, and general corporate expenses; facilitate the repayment of its 5.0% senior notes and also fund future acquisitions.
Apart from this, Rambus also announced its intention to offer $100.0 million unsecured senior notes. The interest rate has not yet been mentioned but the notes are set to mature in 2018.
As of Jun 30, 2013, the company had total senior notes balance of $172.5 million, flat sequentially. The balance consists of 5.0% senior notes due Jun 2014. The company paid $6.3 million as interest expense related to the convertible notes, which comes to 6 cents a share. Following the recent and planned issuance, the senior notes balance will go up by an additional $220.0 million.
But the company is set to redeem the 5% senior notes by 2014, which will bring down the debt balance, yet again. As most of the redemption will be done using the funds accumulated from the new notes issuance, the burden on the company’s cash balance will lessen. Simultaneously, the redemption will reflect the strong liquidity position of the company, which will boost lender confidence.
Rambus exited the quarter with cash, cash equivalents and marketable securities of approximately $205.6 million, down from $214.8 million in the prior quarter.
We are encouraged by Rambus’ second-quarter results as the bottom line surpassed the Zacks Consensus Estimate. The company provided a decent guidance for the third quarter of 2013, given modest royalty receipts. However, we see a better second half given a ramp in its business.
Currently, Rambus has a Zacks Rank #3 (Hold). We would also recommend investors to consider other stocks such as SanDisk Corp. (SNDK), Semiconductor Manufacturing International Corp. (SMI) and Quantum Corp. (QTM), all of which carry a Zacks Rank #1 (Strong Buy).
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