CGI announces pricing of US$650M of 5-year notes

Rhea-AI Summary

CGI (NYSE: GIB) has announced the pricing of US$650 million in 5-year senior unsecured notes, bearing an interest rate of 4.95% per annum. The company plans to enter a currency swap agreement to reduce the Canadian dollar equivalent borrowing cost to 3.7125% per annum.

The offering is expected to close around March 14, 2025, with net proceeds of approximately US$641.3 million after deducting fees and expenses. CGI intends to use the proceeds to repay existing debt and for general corporate purposes.

The notes will be offered to qualified institutional buyers in the United States under Rule 144A and internationally under Regulation S, as well as in Canada through private placement.

Positive

• Successful pricing of US$650M senior notes indicates strong market confidence
• Currency swap reduces effective borrowing cost to 3.7125% from 4.95%
• Debt refinancing opportunity may lead to improved financial terms

Negative

• Increases company's debt obligations by US$650M
• Additional interest expense of 4.95% on new debt

Insights

Financial Analyst

CGI's US$650 million 5-year senior unsecured notes offering represents strategic debt management rather than a significant financial event for this $23.3 billion IT services company. The 4.95% interest rate is noteworthy, but more impressive is management's implementation of a currency swap that effectively reduces the Canadian dollar borrowing cost to 3.7125% – a smart financial engineering move that saves approximately 120 basis points.

The company explicitly states the proceeds will be used to refinance existing debt and for general corporate purposes, suggesting this is primarily a liability management exercise. After fees, CGI will net about US$641.3 million, providing adequate capital for their stated goals.

This transaction demonstrates CGI's continued access to institutional debt markets and ability to secure financing at competitive rates without resorting to equity issuance. The private placement approach through Rule 144A and Regulation S exemptions is standard for corporate debt issuances, allowing CGI to access capital efficiently while avoiding more cumbersome registered offerings.

For a company of CGI's size, this debt issuance represents less than 3% of its market capitalization, indicating the modest relative scale of the transaction. The refinancing likely aims to optimize the company's debt maturity profile and potentially reduce overall interest expenses, though without details on which existing debts are being repaid, the net financial impact remains unclear.

Stock Market Symbols
GIB.A (TSX)
GIB (NYSE)
cgi.com/newsroom

MONTRÉAL, March 12, 2025 /PRNewswire/ - CGI (TSX: GIB.A) (NYSE: GIB) announced today that it has priced an offering of senior unsecured notes. CGI will issue US$650 million in aggregate principal amount of 5-year senior unsecured notes, which will bear interest at the rate of 4.95% per annum (treasury rate plus 100 basis points). Concurrently with the offering, CGI expects to enter into a currency swap agreement to reduce the Canadian dollar equivalent cost of borrowing of the notes to 3.7125% per annum. The offering is expected to close on or about March 14, 2025, subject to customary closing conditions.

The net proceeds from the offering are expected to be approximately US$641.3 million after deducting the initial purchasers' fees and estimated offering expenses. CGI intends to use the net proceeds from the offering to repay existing indebtedness and for general corporate purposes.

The notes will be offered and sold to qualified institutional buyers in the United States pursuant to Rule 144A and outside the United States pursuant to Regulation S under the U.S. Securities Act of 1933, as amended (the "Securities Act"). The notes will be offered and sold in Canada on a private placement basis pursuant to exemptions from the prospectus requirements of applicable Canadian securities laws.

The notes have not been registered under the Securities Act or any state securities laws and may not be offered or sold in the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws. The notes have not been qualified by way of prospectus in any province or territory of Canada and may not be offered or sold in Canada except pursuant to an exemption from, or in a transaction not subject to, the prospectus requirements of applicable Canadian securities laws. This press release shall not constitute an offer to sell or a solicitation of an offer to buy any of the notes and shall not constitute an offer, solicitation or sale of any notes in any jurisdiction where such offering or sale would be unlawful.

About CGI

Founded in 1976, CGI is among the largest independent IT and business consulting services firms in the world. With 91,000 consultants and professionals across the globe, CGI delivers an end-to-end portfolio of capabilities, from strategic IT and business consulting to systems integration, managed IT and business process services and intellectual property solutions. CGI works with clients through a local relationship model complemented by a global delivery network that helps clients digitally transform their organizations and accelerate results. CGI's Fiscal 2024 reported revenue is C$14.68 billion and CGI shares are listed on the TSX (GIB.A) and the NYSE (GIB).

Forward-looking information and statements

This press release contains "forward-looking information" within the meaning of Canadian securities laws and "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995 and other applicable United States safe harbors. All such forward-looking information and statements are made and disclosed in reliance upon the safe harbor provisions of applicable Canadian and United States securities laws. Forward-looking information and statements include all information and statements regarding CGI's intentions, plans, expectations, beliefs, objectives, future performance, and strategy, as well as any other information or statements that relate to future events or circumstances and which do not directly and exclusively relate to historical facts, including, but not limited to, statements regarding the timing for closing of the offering and the expected use of proceeds therefrom. Forward-looking information and statements often but not always use words such as "believe", "estimate", "expect", "intend", "anticipate", "foresee", "plan", "predict", "project", "aim", "seek", "strive", "potential", "continue", "target", "may", "might", "could", "should", and similar expressions and variations thereof. These information and statements are based on our perception of historic trends, current conditions and expected future developments, as well as other assumptions, both general and specific, that we believe are appropriate in the circumstances. Such information and statements are, however, by their very nature, subject to inherent risks and uncertainties, of which many are beyond the control of CGI, and which give rise to the possibility that actual results could differ materially from our expectations expressed in, or implied by, such forward-looking information or forward-looking statements. These risks and uncertainties include but are not restricted to: risks related to the market such as the level of business activity of our clients, which is affected by economic and political conditions, additional external risks (such as pandemics, armed conflict, climate-related issues,  inflation, tariffs and/or trade wars) and our ability to negotiate new contracts; risks related to our industry such as competition and our ability to develop and expand our services to address emerging business demands and technology trends (such as artificial intelligence), to penetrate new markets, and to protect our intellectual property rights; risks related to our business such as risks associated with our growth strategy, including the integration of new operations, financial and operational risks inherent in worldwide operations, foreign exchange risks, income tax laws and other tax programs, the termination, modification, delay or suspension of our contractual agreements, our expectations regarding future revenue resulting from bookings and backlog, our ability to attract and retain qualified employees, to negotiate favorable contractual terms, to deliver our services and to collect receivables, to disclose, manage and implement environmental, social and governance (ESG) initiatives and standards, and to achieve ESG commitments and targets, including without limitation, our commitment to net-zero carbon emissions, as well as the reputational and financial risks attendant to cybersecurity breaches and other incidents, including through the use of artificial intelligence, and financial risks such as liquidity needs and requirements, maintenance of financial ratios, our ability to declare and pay dividends, interest rate fluctuations and changes in creditworthiness and credit ratings; as well as other risks identified or incorporated by reference in this press release, in CGI's annual and quarterly MD&A and in other documents that we make public, including our filings with the Canadian Securities Administrators (on SEDAR+ at www.sedarplus.ca) and the U.S. Securities and Exchange Commission (on EDGAR at www.sec.gov). Unless otherwise stated, the forward-looking information and statements contained in this press release are made as of the date hereof and CGI disclaims any intention or obligation to publicly update or revise any forward-looking information or forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law. While we believe that our assumptions on which these forward-looking information and forward-looking statements are based were reasonable as at the date of this press release, readers are cautioned not to place undue reliance on these forward-looking information or statements. Furthermore, readers are reminded that forward-looking information and statements are presented for the sole purpose of assisting investors and others in understanding our objectives, strategic priorities and business outlook as well as our anticipated operating environment. Readers are cautioned that such information may not be appropriate for other purposes.

Further information on the risks that could cause our actual results to differ significantly from our current expectations may be found in the section titled "Risk Environment" of CGI's annual and quarterly MD&A, which is incorporated by reference in this cautionary statement. We also caution readers that the above-mentioned risks and the risks disclosed in CGI's annual and quarterly MD&A and other documents and filings are not the only ones that could affect us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial could also have a material adverse effect on our financial position, financial performance, cash flows, business or reputation.

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SOURCE CGI Inc.

FAQ

What is the size and interest rate of CGI's (GIB) new senior notes offering?

CGI is offering US$650 million in 5-year senior unsecured notes with a 4.95% per annum interest rate.

When will CGI's (GIB) US$650M notes offering close?

The notes offering is expected to close on or about March 14, 2025, subject to customary closing conditions.

How will CGI (GIB) use the proceeds from the US$650M notes offering?

CGI will use the net proceeds of approximately US$641.3 million to repay existing indebtedness and for general corporate purposes.

What is the effective borrowing cost for CGI (GIB) after the currency swap?

Through a currency swap agreement, CGI expects to reduce the Canadian dollar equivalent borrowing cost to 3.7125% per annum.