Shares of TransDigm Group Inc. (TDG) rose 3.1% after the company announced it plans to amend its senior secured credit facilities on May 12. Alongside, the company is considering paying a special dividend in its efforts to enhance shareholders’ value.
TransDigm has placed a proposition in front of its lenders to extend the existing facility by $625 million. The extended facility will also allow the company to alter some ratios in its existing senior facility and will also increase in available revolving credit facility by $400 million.
Apart from this term loan of $625 million, the company also intends to raise a new sub-ordinate debt of $2.35 billion. Additionally, the company has the scope for utilizing about $200 million from its trade receivables securitization facility.
A part of the proceeds will also be utilized to purchase TransDigm’s outstanding $1.6 billion aggregate principal amount of 7.75% Senior Subordinated Notes that are due in 2018.
The company is considering dishing out as much as $900 million–$1.5 billion for the payout of dividend. The company’s strong financial position along with a portion of the proceeds from the earlier mentioned credit facility is expected to cushion the payout.
Recently, TransDigm had reported strong second-quarter fiscal 2014 results with year-over-year growth in both earnings and revenues. Its cash from operating activities stood at $220.5 million, while cash and cash equivalents were at $475.7 million. The company had a long-term debt of $5.7 billion.
Further, the company remains optimistic about its future growth. It also expects to reap positive synergies from its recent acquisitions and as such the company raised its outlook for fiscal 2014 to highlight the benefits of its recent EME GmbH acquisition.
TransDigm currently holds a Zacks Rank #4 (Sell). Other better-ranked stocks that look promising at the moment include Alliant Techsystems Inc. (ATK), CAE Inc. (CAE) and Curtiss-Wright Corp. (CW). All three stocks carry a Zacks Rank #2 (Buy).