PBI Pitney Bowes Inc

Pitney Bowes Inc. (PBI) announced a cash tender offer for some of its Notes. These include any or all of its 4.875% Medium-Term Notes due 2014, 5.000% Notes due 2015 and 4.750% Medium-Term Notes due 2016. All these notes are issued by Pitney Bowes.

In addition to the terms and conditions set by the company’s Offer to Purchase dated Feb 26, 2013, and the related Letter of Transmittal, the company has also expressed its intentions to start a new offer and sell new debt securities through an underwritten public offering.

Unless extended or terminated earlier, the offer will expire on Mar 25, 2013. The proceeds from the new debt security issue along with the company’s cash in hand will be utilized to finance the buyback of the notes validly tendered.

Currently, there is a $1350 million aggregate principal amount of Notes outstanding that the company intends to buy. The revised maximum series tender cap for the notes were $0.2 billion for the 2014 notes, $0.14 billion for the 2015 notes and $ 0.075 billion for the 2016 notes.

As per the tender offer, the holders who surrender their notes at or prior to 5 p.m., New York City time, on Mar 11, 2013 (unless extended), will be qualified to receive the ‘Total Consideration’ on the notes, indicating an early tender payment of $30 per $1,000 principal amount of the Notes on all such notes.

For notes tendered after the Early Tender Date but prior to 5 p.m., New York City time, on Mar 25, 2013 (unless extended), holders will be eligible to receive only the applicable Total Consideration, less the applicable Early Tender Payment on the Settlement Date.

Goldman Sachs & Co. (GS), and J.P. Morgan Securities (JPM) are the joint dealer manager agents for the Tender Offers. Additionally, Global Bondholder Services Corporation is acting as solicitation and information agent for the Offers.

During the last few quarters the company has been incurring huge capital expenditure, which significantly affected its free cash flow balance. Free cash flow was also impacted by higher working capital requirements, due to the timing of disbursements and less of a benefit from finance receivables. The continuing economic uncertainty remains a matter of concern.

A sizeable portion of Pitney Bowes’ total borrowings have been issued in the commercial paper markets. Although Pitney Bowes continues to have unencumbered access to these markets, the current economic uncertainties may affect its borrowing power.

Given its deteriorating cash flows and aggressive capex plans, it makes sense for PBI to cut down its debt as a part of its capital management plan. The resultant extension of maturities would also support its cash balances.

Pitney Bowes currently has a Zacks Rank #4 (Sell), so it might not be a good stock to consider at the moment. However, some other companies that are worth looking into include Tyco International (TYC) which has a Zacks Rank #2 (Buy) and Symantec Corp. (SYMC), which has a Zacks Rank #1 (Strong Buy).

 
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