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TransDigm's (TDG) Unit Prices 4.6% Senior Notes Worth $1.2B

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TransDigm Group Incorporated’s TDG wholly-owned subsidiary TransDigm Inc., announced the pricing of its private offering of $1,200 million aggregate principal of 4.625% senior subordinated notes. The notes due 2029 will be issued at a par price.

The notes will be guaranteed with certain exceptions by its U.S. subsidiaries on a senior subordinated basis. The offering is likely to close on Jan 20, 2021 and is subject to customary closing conditions.

Rationale Behind Issuing of Notes

The company is fully tapping this opportunity of issuing new debts with low interest rates. Precisely, it will utilize the proceeds to repay its existing high-interest bearing old debts. Remarkably, the net proceeds along with the cash in hand will be used in redeeming all its outstanding 6.50% senior subordinated notes due 2024.

The aim of the aforementioned transaction is to reduce the company’s cost of financing.

Debt Management

Transdigm had a long-term debt of $19,384 million as of Sep 30, 2020, slightly lower than $19,410 million as of Jun 30, 2020. The company's current debt stands at $625 million as of Sep 30, 2020, down sequentially from $629 million. Also, its times interest earned (TIE) ratio stands at 1.72 for the September quarter, lower than the year-ago figure of 2.24. Though the TIE ratio decreased in fiscal 2020, the same of more than 1 indicates the company to conveniently meet its near-term debt obligations.

Interest expenses of the company at the end of fiscal 2020 were $1,029 million, up from $859 million a yearago. Thus, refinancing of debts will allow it to lower its capital-servicing expenses and boost its margins.

Zacks Rank & Price Performance

TransDigm currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

In the past six months, shares of TransDigm have surged 40.5%, outperforming the industry’s 25.7% growth.

Other Stocks to Consider

A few other stocks worth considering from the same sector are Ducommun Incorporated DCO, Leidos Holdings, Inc. LDOS and Rada Electronics Industries Limited RADA, all holding a Zacks Rank#2 (Buy) at present.

Ducommun Incorporated pulled off an earnings surprise of 66.7%, on average, in the last four quarters. The Zacks Consensus Estimate for 2021 earnings has moved 1.1% north in the past 60 days.

Leidos Holdings delivered an earnings surprise of 17.6%, on average, in the trailing four quarters. The company expects to see earnings growth of 10.8% in the long term (three to five years).

The Zacks Consensus Estimate for Rada Electronics Industries’ 2021 earnings has moved 31.8% north in the past 60 days. Also, the company has soared 65.9% in the past six months.

Zacks Names “Single Best Pick to Double”

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You know this company from its past glory days, but few would expect that it’s poised for a monster turnaround. Fresh from a successful repositioning and flush with A-list celeb endorsements, it could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in a little more than 9 months and Nvidia which boomed +175.9% in one year.

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Transdigm Group Incorporated (TDG) : Free Stock Analysis Report
 
Ducommun Incorporated (DCO) : Free Stock Analysis Report
 
Leidos Holdings, Inc. (LDOS) : Free Stock Analysis Report
 
Rada Electronics Industries Limited (RADA) : Free Stock Analysis Report
 
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