DIRECTV Issues Debt - Analyst Blog
March 08 2012 - 3:45AM
Zacks
DIRECTV's (DTV) unit DIRECTV Holdings LLC,
decided to issue $4 billion debts in three tranches of $1.25
billion, $1.5 billion and $1.25 billion, respectively, maturing
2017, 2022 and 2042. The issued debts carry a respective interest
rate of 2.4%, 3.8% and 5.15%. The debt issuance is expected to be
closed by March 8, 2012.
The company expects to generate net proceeds of $3.97 billion
from the debt issuance and will utilize it to fund general expenses
or repurchase shares.
DIRECTV exited fiscal 2011 with an enormous $13.5 billion in
long-termdebt. So, further issue of debt will increase risk for the
company. At the end of fiscal 2011, the company had $873 million in
cash. Going forward, the mounting debt will also led to higher
interest payments for the company.
Last year, the company issued similar amount of debts and the
proceeds were utilized to finance share repurchase plan. So, going
by that trend, we expect that the company in order to repurchase
shares worth $6 billion, will continue to issue debts or use its
revolving credit facility of $2 billion.
DIRECTV remains one of the few pay-TV service providers that are
still generating commendable video subscriber growth. The company
is continuously upgrading its customers with premium plans. We
believe that such initiatives taken by DIRECTV will certainly drive
its top-line growth going forward.
However, within the satellite TV industry, DIRECTV is facing
increasing competition from its nearest rival DISH
Network (DISH). Furthermore, U.S. telecom giants,
AT&T (T) and Verizon Wireless
(VZ) are increasingly rolling out their fiber-based network in
order to provide video services. Additionally, the newly developed
Internet video streaming companies like Netflix
(NFLX), Hulu, YouTube have become major threat to the overall
pay-TV industry. We, thus, maintain our long-term Neutral
recommendation on DIRECTV.
Currently, DIRECTV has a Zacks#3 Rank, implying a short-term
Hold rating on the stock.
California-based DIRECTV Group Inc. is a provider of satellite
delivered digital television and video service.
DISH NETWORK CP (DISH): Free Stock Analysis Report
DIRECTV (DTV): Free Stock Analysis Report
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VERIZON COMM (VZ): Free Stock Analysis Report
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