CGI announces private offering of C$750 million, in aggregate, of 3-year and 5-year notes

Rhea-AI Summary

CGI (TSX: GIB.A) (NYSE: GIB) has announced a private offering of C$750 million in senior unsecured notes. The offering consists of C$300 million in 3-year notes with a 3.987% interest rate and C$450 million in 5-year notes with a 4.147% interest rate. The offering is expected to close around September 5, 2024. CGI plans to use the net proceeds of approximately C$746.1 million to repay existing debt, including US$350 million in notes maturing on September 12, 2024, and for general corporate purposes. The notes will be offered privately in Canadian provinces and are not registered under the U.S. Securities Act.

Positive

• Raising C$750 million through private offering of senior unsecured notes
• Net proceeds of approximately C$746.1 million after fees and expenses
• Repayment of existing debt, including US$350 million maturing on September 12, 2024
• Diversification of debt maturity profile with 3-year and 5-year notes

Negative

• Increase in overall debt levels
• Potential increase in interest expenses due to new notes

Insights

Financial Analyst

CGI's C$750 million private offering of senior unsecured notes is a strategic move to refinance existing debt and bolster its financial position. The 3.987% interest rate for 3-year notes and 4.147% for 5-year notes are competitive in the current market, indicating investor confidence in CGI's creditworthiness. This debt issuance allows CGI to extend its debt maturity profile and potentially lower its overall interest expenses. The company's ability to raise capital in the Canadian market demonstrates its strong financial standing and market reputation. However, investors should monitor CGI's debt-to-equity ratio and ensure that this additional debt doesn't overly leverage the company's balance sheet.

Market Research Analyst

CGI's decision to issue notes in Canadian dollars aligns with its significant operations in Canada and helps mitigate currency risk. The oversubscription of the offering, as evidenced by the C$750 million raise versus the US$350 million debt being repaid, suggests strong demand for CGI's debt and potentially signals positive market sentiment towards the company's future prospects. This successful capital raise could positively impact CGI's stock performance in the short term. Long-term investors should focus on how effectively CGI utilizes the additional capital for 'general corporate purposes' to drive growth and enhance shareholder value.

Legal Expert

The private placement structure of this offering exempts CGI from certain regulatory requirements, streamlining the capital-raising process. However, this limits the secondary market liquidity for these notes. The explicit statement that the notes are not registered under the U.S. Securities Act is important for compliance with securities laws. Investors should note that while this approach offers flexibility to CGI, it also means less regulatory oversight compared to public offerings. The involvement of reputable financial institutions as agents provides some assurance of due diligence, but investors should conduct their own thorough analysis before participating in such private placements.

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

MONTRÉAL, Sept. 3, 2024 /PRNewswire/ - CGI (TSX: GIB.A) (NYSE: GIB) announced today that it has priced an offering of Canadian dollar denominated senior unsecured notes in two series.

CGI will issue C$750 million in aggregate principal amount of senior unsecured notes, consisting of C$300 million aggregate principal amount of 3-year notes and C$450 million aggregate principal amount of 5-year notes. The 3-year notes will bear interest at the rate of 3.987% per annum and 5-year notes will bear interest at the rate of 4.147% per annum. The offering is expected to close on or about September 5, 2024, subject to customary closing conditions.

The net proceeds from the offering are expected to be approximately C$746.1 million after deducting the agents' fees and estimated offering expenses. CGI intends to use the aggregate net proceeds from the offering to repay existing indebtedness and for general corporate purposes. The existing indebtedness includes senior unsecured notes maturing on September 12, 2024, in an amount of US$350 million.

The notes are being offered in Canada on an agency basis by a syndicate of agents led by BMO Nesbitt Burns Inc., CIBC World Markets Inc., Scotia Capital Inc., Desjardins Securities Inc. and TD Securities Inc.

The notes will be offered on a private placement basis in each of the provinces of Canada in reliance upon exemptions from the prospectus requirements of applicable securities laws. The notes have not been, and will not be, registered under the Securities Act of 1933, as amended (the "U.S. Securities Act"), or any state securities laws and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the U.S. Securities Act.

This press release shall not constitute an offer to sell or a solicitation of an offer to buy any of the notes in the United States or any other 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 90,000 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 Fiscal 2023 reported revenue is $14.30 billion and CGI shares are listed on the TSX (GIB.A) and the NYSE (GIB). Learn more at cgi.com.

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 harbours. All such forward-looking information and statements are made and disclosed in reliance upon the safe harbour 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. 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 and inflation) 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 favourable 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 structure of CGI's (GIB) new debt offering?

CGI is offering C$750 million in senior unsecured notes, consisting of C$300 million in 3-year notes at 3.987% interest and C$450 million in 5-year notes at 4.147% interest.

When is the expected closing date for CGI's (GIB) debt offering?

The offering is expected to close on or about September 5, 2024, subject to customary closing conditions.

How does CGI (GIB) plan to use the proceeds from the debt offering?

CGI intends to use the net proceeds of approximately C$746.1 million to repay existing indebtedness, including US$350 million in notes maturing on September 12, 2024, and for general corporate purposes.

Are CGI's (GIB) new notes registered under the U.S. Securities Act?

No, the notes have not been and will not be registered under the U.S. Securities Act of 1933. They are being offered on a private placement basis in Canadian provinces.