Booz Allen Hamilton Announces Pricing of Senior Notes Offering

Rhea-AI Summary

Booz Allen Hamilton (NYSE: BAH) has announced the pricing of $650 million in Senior Notes due 2035 with a 5.950% interest rate. The offering, expected to close on March 14, 2025, will be issued by its wholly-owned subsidiary Booz Allen Hamilton Inc. and fully guaranteed by the parent company.

The company plans to use the net proceeds for general corporate purposes and to repay outstanding short-term borrowings under the Revolving Credit Facility, which were primarily used for open market share repurchases. The offering is being managed by multiple financial institutions, with BofA Securities, J.P. Morgan Securities, SMBC Nikko Securities America, and Wells Fargo Securities acting as joint bookrunners.

Positive

• Company demonstrates strong market access with $650 million debt raising capability
• Share repurchase program indicates commitment to returning value to shareholders
• Long-term debt structure with 2035 maturity provides financial flexibility

Negative

• Additional debt increases company's leverage and interest expense burden
• 5.950% interest rate reflects relatively high borrowing costs

Insights

Financial Analyst

Booz Allen Hamilton's pricing of $650 million in senior notes at 5.950% due 2035 represents a significant long-term debt issuance that reshapes their capital structure. This move effectively transforms short-term revolving credit borrowings (used for share repurchases) into fixed-rate, long-term obligations with a 10-year maturity.

The 5.950% coupon rate appears reasonable in the current rate environment for a company of BAH's credit quality. This transaction demonstrates strong market access and investor confidence in BAH's long-term financial stability. By terming out revolving debt that funded share repurchases, management is executing a balanced capital allocation strategy that maintains financial flexibility while returning capital to shareholders.

This debt issuance provides BAH with enhanced liquidity for general corporate purposes while locking in current rates for a decade, reducing near-term refinancing risk. The company's ability to secure $650 million with prominent underwriters (BofA Securities, J.P. Morgan, SMBC Nikko, Wells Fargo) reflects solid institutional support.

This transaction should be viewed within BAH's broader financial strategy - using debt capacity to enhance shareholder returns while maintaining appropriate leverage. While the additional long-term debt increases interest expense, it supports the company's ongoing share repurchase program, which can be accretive to earnings per share over time.

Credit Market Specialist

This $650 million senior notes offering represents a textbook example of liability management through terming out short-term debt. By issuing 10-year notes at 5.950%, BAH is strategically locking in fixed-rate, long-term financing in a market where interest rate uncertainties remain elevated.

The primary use - repaying revolving credit facility borrowings that funded share repurchases - effectively transforms temporary financing into permanent capital. This approach prevents dilution of the share repurchase benefits that would occur if they needed to reissue equity later to address short-term debt maturities.

The strong syndicate of underwriters, including top-tier institutions like BofA Securities, J.P. Morgan, SMBC Nikko, and Wells Fargo, indicates robust demand among debt investors. This breadth of distribution support suggests the placement encountered little resistance despite the notable size and decade-long commitment.

For credit analysis purposes, this transaction appears leverage-neutral in the immediate term since it primarily replaces existing debt. However, the additional proceeds earmarked for "general corporate purposes" could potentially increase leverage depending on deployment. The 5.950% coupon reflects an appropriate credit spread for BAH's risk profile while providing certainty against future interest rate volatility through 2035 - a prudent move given persistent macroeconomic uncertainties.

MCLEAN, Va.--(BUSINESS WIRE)-- Booz Allen Hamilton Holding Corporation (NYSE: BAH) (“Booz Allen”) announced that its wholly-owned subsidiary, Booz Allen Hamilton Inc. (the “Issuer”), has priced $650 million aggregate principal amount of its 5.950% Senior Notes due 2035 (the “Notes”). The offering is expected to close on March 14, 2025, subject to the satisfaction of certain closing conditions. Booz Allen will fully and unconditionally guarantee the Notes on a senior unsecured basis.

The Issuer intends to use the net proceeds of this offering for general corporate purposes and to repay short-term borrowings outstanding under the Revolving Credit Facility (which were used primarily for open market repurchases of Booz Allen’s shares).

BofA Securities, Inc., J.P. Morgan Securities LLC, SMBC Nikko Securities America, Inc. and Wells Fargo Securities, LLC are acting as representatives of the underwriters and as joint bookrunners for the offering, along with Goldman Sachs & Co. LLC, PNC Capital Markets LLC, Truist Securities, Inc. and U.S. Bancorp Investments, Inc. The co-managers for the offering were Capital One Securities, Inc., Drexel Hamilton, LLC, Fifth Third Securities, Inc. and TD Securities (USA) LLC.

This press release is for informational purposes only and is not an offer to sell or purchase nor the solicitation of an offer to sell or purchase securities and shall not constitute an offer, solicitation or sale in any state or jurisdiction in which, or to any person to whom such an offer, solicitation or sale would be unlawful.

The Issuer has filed a registration statement (including a prospectus) with the SEC for the offering to which this communication relates. Before you invest, you should read the prospectus in that registration statement and other documents the Issuer has filed with the SEC for more complete information about the issuer and this offering. You may get these documents for free by visiting EDGAR on the SEC Web site at www.sec.gov. Alternatively, the underwriters can arrange to send you the prospectus if you request it from one of the representatives of the underwriters by calling or e-mailing BofA Securities, Inc. at 1-800-294-1322 or dg.prospectus_requests@bofa.com, calling J.P. Morgan Securities LLC collect at 1-212-834-4533, SMBC Nikko Securities America, Inc. collect at 1-212-224-5135, or by e-mailing prospectus@smbcnikko-si.com or Wells Fargo Securities, LLC, toll-free at 1-800-645-3751, or by e-mailing wfscustomerservice@wellsfargo.com.

Forward-Looking Statements

Certain statements in this press release include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Examples of forward-looking statements include information concerning Booz Allen’s financing plans, including statements related to the Issuer’s offering of the Notes and intended use of net proceeds of the offering. These forward-looking statements relate to future events or Booz Allen’s future financial performance and involve known and unknown risks, uncertainties that may cause actual results, levels of activity, performance or achievements to differ materially from any future results, levels of activity, performance or achievements implied by these forward-looking statements including, without limitation, risks related to whether the Issuer will consummate the offering of the Notes on the expected terms, or at all, market and other general economic conditions and whether the Issuer and Booz Allen will be able to satisfy the conditions required to close any sale of the Notes. These and other risks concerning Booz Allen and its businesses are described in additional detail in its Annual Report on Form 10-K for the year ended March 31, 2024, its Quarterly Reports on Form 10-Q for the quarters ended June 30, 2024, September 30, 2024 and December 31, 2024, and other filings made by Booz Allen with the Securities and Exchange Commission.

BAHPR-FI

View source version on businesswire.com: https://www.businesswire.com/news/home/20250311980658/en/

Jessica Klenk, Media Relations

Klenk_Jessica@bah.com

703-377-4296

Dustin Darensbourg, Investor Relations

Investor_Relations@bah.com

Source: Booz Allen Hamilton Holding Corporation

FAQ

What is the interest rate and maturity date for Booz Allen's (BAH) new Senior Notes offering?

The Senior Notes have a 5.950% interest rate and will mature in 2035.

How much is Booz Allen (BAH) raising through its Senior Notes offering?

Booz Allen is raising $650 million through this Senior Notes offering.

When is the closing date for BAH's Senior Notes offering?

The offering is expected to close on March 14, 2025.

What will Booz Allen (BAH) use the proceeds from the Senior Notes for?

The proceeds will be used for general corporate purposes and to repay short-term borrowings under the Revolving Credit Facility, which were used primarily for share repurchases.