DXC Technology Company
DXC
has set pricing of the proposed tender offers to redeem senior notes worth $445 million. Notably, on Mar 16, the IT services provider commenced tender offers to purchase the entire outstanding amount under two different senior notes.
The notes include 4.450% senior notes due 2022 issued by DXC (DXC Notes) worth $274.5 million aggregate principal amount and 4.450% senior notes due 2022 worth $170.8 million issued by the company’s wholly-owned subsidiary Computer Sciences Corporation (CSC Notes).
DXC announced yesterday that consideration for each $1,000 principal amount of the notes would be $1,057.27. The tender offer expired yesterday at 5:00 p.m. EDT.
DXC will fund the redemption of the aforementioned senior notes through its available cash in hand. As of Dec 31, 2020, the IT services company had cash and cash equivalents of $3.92 billion.
The company’s latest tender offer to redeem senior notes reflects its commitment toward reducing overall outstanding debt.
Notably, DXC was formed in 2017 by the merger of Computer Sciences Corp. and the enterprise services unit of
Hewlett Packard Enterprise
HPE
. CSC, prior to the completion of the merger, took additional debt. This has amplified DXC’s total long-term liability, thereby, increasing its interest-cost burden. At the end of fiscal 2020, the company had total outstanding debt (net of current maturities) of $8.67 billion.
To lower its debt burden, the company has resorted to spin-offs and the divestment of non-core assets. Toward this, DXC spun off its U.S. State and Local Health and Human Services business last year and sold it to the private equity firm Veritas Capital for $5 billion.
In June 2020, DXC announced entering into an agreement to sell its healthcare software provider business unit to privately-held Dedalus Group for a total cash consideration of $525 million. The transaction is anticipated to conclude this March.
The strategy has helped it significantly reduce its outstanding debt level to $5.44 billion as of Dec 31, 2020, from $8.67 billion as of Mar 31, 2020.
Additionally, spinning off non-core assets improves DXC’s focus on its core businesses. Also, it enhances the firm’s ability to execute acquisition strategies across high-growth businesses, including enterprise software-as-a-service, technology security solutions, and autonomous driving.
DXC currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader technology sector are
Apple
AAPL
and
Facebook
FB
, both carrying a Zacks Rank #2 (Buy) at present. You can see
the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
.
Long-term earnings growth rates for Apple and Facebook are currently pegged at 11% and 19.2%, respectively.
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