Johnson Controls Announces Reference Yields and Upsize for Its Cash Tender Offers for Its Senior Notes

Rhea-AI Summary

Johnson Controls (NYSE: JCI) has announced the reference yields for its cash tender offers and increased its aggregate tender cap from $90 million to $119 million for its outstanding senior notes. The tender offers, initially announced on May 20, 2024, will expire on June 18, 2024. The early tender date was June 3, 2024, with early settlement on June 6, 2024. The 5.125% Senior Notes due 2045 saw $164.999 million tendered, but only $119 million will be accepted at a proration factor of 72.18%. The 4.500% Senior Notes due 2047 had $108.749 million tendered, but none will be accepted. All other terms remain unchanged.

Positive

• Increased aggregate tender cap from $90 million to $119 million.
• High tender uptake with $164.999 million in 5.125% Senior Notes due 2045 tendered.
• Maintained early settlement date as June 6, 2024.

Negative

• No 4.500% Senior Notes due 2047 will be accepted despite $108.749 million tendered.
• Proration factor for 5.125% Senior Notes due 2045 at 72.18%, leaving some tenders unaccepted.
• Potential market uncertainty due to acceptance priority and proration mechanisms.

Insights

Financial Analyst

Johnson Controls' recent announcement regarding the upsizing of its cash tender offers for its senior notes is a significant move that investors need to understand carefully. The increase in the aggregate tender cap from $90,000,000 to $119,000,000 signifies the company's strong liquidity position and its focus on optimizing its capital structure.

From a financial perspective, the acceptance of the principal amount up to the newly established cap indicates a strategic approach to manage outstanding debt. This can potentially lead to reduced interest expenses, improving the company's bottom line. Given the early tender payment and the proration factor of 72.18% for the 5.125% Senior Notes due 2045, it suggests a clear prioritization of higher-yield debt.

However, the rejection to purchase any of the 4.500% Senior Notes due 2047 could be a signal that the company is selectively targeting specific maturities that it finds more advantageous to retire early. This kind of selective debt management is typical in a rising interest rate environment, as it helps reduce long-term interest obligations.

For investors, understanding the tender offers' underlying intent—reducing debt load and interest obligations—can provide insights into the company's financial health and strategic financial planning. It's a positive indicator of management's proactive stance on financial optimization.

Market Research Analyst

This move by Johnson Controls should not be viewed in isolation but rather in the broader context of the company's market positioning and strategic initiatives. The increase in the tender cap is an indication of robust demand from investors to tender their securities, which can be read as a sign of confidence in the company's ability to manage its liabilities prudently.

From a market standpoint, this can improve the perception of Johnson Controls in the bond market, potentially lowering future borrowing costs. The total consideration offered for the 5.125% Senior Notes due 2045 and the 4.500% Senior Notes due 2047 reflects competitive yields, balancing investor interests with the company's cost-saving objectives.

The company's ability to execute such a tender offer without significantly impacting its liquidity reflects positively on its operational cash flow and financial management. For stakeholders, this could signify a lower risk profile and potentially more stable returns in the future.

CORK, Ireland, June 4, 2024 /PRNewswire/ -- Johnson Controls International plc (NYSE: JCI) (the "Company" or "Johnson Controls") today announced the Reference Yields for its previously announced cash tender offers (the "Tender Offers"), in the order of priority set forth in the table below, and the increase of the previously announced aggregate tender cap from $90,000,000 aggregate principal amount to $119,000,000 aggregate principal amount (as amended hereby, the "Aggregate Tender Cap") of the outstanding senior notes listed in the table below (collectively, the "Securities" and each a "series").  Except as described in this press release, all other terms of the Tender Offers as described in the offer to purchase, dated May 20, 2024 (as it may be amended or supplemented from time to time, the "Offer to Purchase"), remain unchanged.

Title of Security	CUSIP No./ ISIN No.	Principal Amount Outstanding	Acceptance Priority Level(1)	U.S. Treasury Reference Security	Reference Yield(2)	Bloomberg Reference Page	Fixed Spread	Early Tender Payment	Total Consideration(3)	Principal Amount Tendered	Principal Amount Accepted
5.125% Senior Notes due 2045	478375AS7 / US478375AS78	$372,006,000	1	4.500% UST due February 15, 2044	4.602 %	PX1	+90 bps	$50	$952.99	$164,999,000	$119,000,000
4.500% Senior Notes due 2047	478375AU2 / US478375AU25	$500,000,000	2	4.500% UST due February 15, 2044	4.602 %	PX1	+90 bps	$50	$870.96	$108,749,000	$0

(1)       The offers with respect to the Securities are subject to the Aggregate Tender Cap. The Company will purchase up to the Aggregate Tender Cap of its Securities, subject to the Acceptance Priority Levels as set forth in the table above (each, an "Acceptance Priority Level").

(2)       Each Reference Yield was determined at 10:00 a.m. New York City time on June 4, 2024.

(3)       Payable per each $1,000 principal amount of each series of Securities validly tendered at or prior to the early tender date and time of 5:00 p.m., New York City time, on June 3, 2024 (the "Early Tender Date") and accepted for purchase and is inclusive of the Early Tender Payment.

The Tender Offers will expire at 5:00 p.m., New York City time, on June 18, 2024, or, in each case, any other date and time to which the Company extends the applicable Tender Offer (such date and time, as it may be extended with respect to a Tender Offer, the applicable "Expiration Date"), unless earlier terminated. However, because the aggregate principal amount of the Securities validly tendered and not validly withdrawn as of the Early Tender Date exceeds the Aggregate Tender Cap and because Securities tendered prior to or at the Early Tender Date have priority over any Securities tendered after the Early Tender Date, no Securities tendered after the Early Tender Date will be accepted for purchase in the Tender Offers, regardless of Acceptance Priority Levels.

Subject to the Acceptance Priority Levels, the Aggregate Tender Cap and proration for the Securities, Securities tendered and not validly withdrawn as of the Early Tender Date will be accepted for purchase and payment on June 6, 2024 (the "Early Settlement Date"). The proration factor for the 5.125% Senior Notes due 2045 is 72.18%. No 4.500% Senior Notes due 2047 will be accepted for purchase in the Tender Offers. Securities not accepted for purchase on the Early Settlement Date will be promptly credited to the account of the registered holder of such Securities with The Depository Trust Company in accordance with the Offer to Purchase.

The Tender Offers are not conditioned upon the tender of any minimum principal amount of the Securities. The Company's obligation to accept for purchase and to pay for Securities in the Tender Offers is subject to the satisfaction or waiver of the conditions described in the Offer to Purchase. The Company reserves the right, subject to applicable law, at any time to (i) waive any and all conditions to any of the Tender Offers, (ii) extend or terminate any of the Tender Offers, (iii) increase, decrease or eliminate the Aggregate Tender Cap without extending the applicable Withdrawal Deadline (as defined in the Offer to Purchase), or (iv) otherwise amend any of the Tender Offers in any respect. Any such change may be significant. Accordingly, holders should not tender any Securities that they do not wish to be accepted in a Tender Offer.

Information Relating to the Tender Offers

BofA Securities is the dealer manager (the "Dealer Manager") for the Tender Offers. Investors with questions regarding the Tender Offers may contact BofA Securities at (980) 387-3907 (collect), (888) 292-0070 (toll-free) or by email at debt_advisory@bofa.com. D.F. King & Co., Inc. is the tender and information agent for the Tender Offers and can be contacted at (877) 283-0318 (bankers and brokers can call collect at (212) 269-5550) or by email at jci@dfking.com.

None of the Company or its affiliates, their respective boards of directors or managers, the Dealer Manager, the tender and information agent or the trustee with respect to any Securities is making any recommendation as to whether holders should tender any Securities in response to any of the Tender Offers, and neither the Company nor any such other person has authorized any person to make any such recommendation. Holders must make their own decision as to whether to tender any of their Securities, and, if so, the principal amount of Securities to tender.

This press release shall not constitute an offer to sell, a solicitation to buy or an offer to purchase or sell any securities. The Tender Offers are being made only pursuant to the Offer to Purchase and only in such jurisdictions as is permitted under applicable law.

The full details of the Tender Offers, including complete instructions on how to tender Securities, are included in the Offer to Purchase. Holders are strongly encouraged to read carefully the Offer to Purchase, including materials incorporated by reference therein, because they contain important information. The Offer to Purchase may be obtained from D.F. King & Co., Inc., free of charge, by calling toll-free at (877) 283-0318  (bankers and brokers can call collect at (212) 269-5550) or by email at jci@dfking.com.

About Johnson Controls

At Johnson Controls (NYSE: JCI), we transform the environments where people live, work, learn and play. As a global leader in smart, healthy and sustainable buildings, our mission is to reimagine the performance of buildings to serve people, places and the planet.

Building on a proud history of nearly 140 years of innovation, we deliver the blueprint of the future for industries such as healthcare, schools, data centers, airports, stadiums, manufacturing and beyond through OpenBlue, our comprehensive digital offering.

Today, with a global team of 100,000 experts in more than 150 countries, Johnson Controls offers the world's largest portfolio of building technology and software as well as service solutions from some of the most trusted names in the industry.

Johnson Controls International plc Cautionary Statement Regarding Forward-Looking Statements

The Company has made statements in this communication that are forward-looking and therefore are subject to risks and uncertainties. Forward-looking statements may be identified by the use of words such as "may," "will," "expect," "intend," "estimate," "anticipate," "believe," "should," "forecast," "project" or "plan" and terms of similar meaning in connection with a discussion of future operating or financial performance. However, the absence of these words does not mean that a statement is not forward-looking. The Company cautions that these statements are subject to numerous important risks, uncertainties, assumptions and other factors, some of which are beyond the Company's control, that could cause the Company's actual results to differ materially from those expressed or implied by such forward- looking statements, including, among others, risks related to: the Company's ability to develop or acquire new products and technologies that achieve market acceptance and meet applicable quality and regulatory requirements; the Company's ability to manage general economic, business and capital market conditions, including the impact of recessions, economic downturns and global price inflation; fluctuations in the cost and availability of public and private financing for the Company's customers; the Company's ability to innovate and adapt to emerging technologies, ideas and trends in the marketplace, including the incorporation of technologies such as artificial intelligence; the Company's ability to manage macroeconomic and geopolitical volatility, including shortages impacting the availability of raw materials and component products and the conflicts between Russia and Ukraine and Israel and Hamas; managing the risks and impacts of potential and actual security breaches, cyberattacks, privacy breaches or data breaches, including business, service, or operational disruptions, the unauthorized access to or disclosure of data, financial loss, reputational damage, increased response and remediation costs, legal, and regulatory proceedings or other unfavorable outcomes; the Company's ability to remediate its material weakness; maintaining and improving the capacity, reliability and security of the Company's enterprise information technology infrastructure; the Company's ability to manage the lifecycle cybersecurity risk in the development, deployment and operation of the Company's  digital platforms and services; changes to laws or policies governing foreign trade, including economic sanctions, tariffs, foreign exchange and capital controls, import/export controls or other trade restrictions; fluctuations in currency exchange rates; changes or uncertainty in laws, regulations, rates, policies, or interpretations that impact the Company's business operations or tax status; the ability to adapt to global climate change, climate change regulation and successfully meet the Company's public sustainability commitments; risks and uncertainties related to the settlement with a nationwide class of public water systems concerning the use of aqueous film forming foam; the outcome of litigation and governmental proceedings; the risk of infringement or expiration of intellectual property rights; the Company's ability to manage disruptions caused by catastrophic or geopolitical events, such as natural disasters, armed conflict, political change, climate change, pandemics and outbreaks of contagious diseases and other adverse public health developments; the ability of the Company to drive organizational improvement; any delay or inability of the Company to realize the expected benefits and synergies of recent portfolio transactions; the ability to hire and retain senior management and other key personnel; the tax treatment of recent portfolio transactions; significant transaction costs and/or unknown liabilities associated with such transactions; labor shortages, work stoppages, union negotiations, labor disputes and other matters associated with the labor force; and the cancellation of or changes to commercial arrangements. Investors are therefore cautioned not to place undue reliance on any forward looking statements. For further discussion of certain of these factors, see Item 1A. Risk Factors in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2023, filed with the U.S. Securities and Exchange Commission (the "SEC") on December 14, 2023 and in our subsequent and future filings with the SEC, which are available at www.sec.gov. Investors should understand that it is not possible to predict or identify all such factors and should not consider this list to be a complete statement of all potential risks and uncertainties. The forward-looking statements included in this communication are made only as of the date of the document in which they are included, unless otherwise specified, and, except as required by law, the Company assumes no obligation, and disclaims any obligation, to update forward-looking statements to reflect events or circumstances occurring after the date of such document.

INVESTOR CONTACTS:	MEDIA CONTACT:
Jim Lucas	Danielle Canzanella
Direct: 651.391.3182	Direct: 203.499.8297
Email: jim.lucas@jci.com	Email: danielle.canzanella@jci.com
Michael Gates
Direct: 414.524.5785
Email: michael.j.gates@jci.com

 

 

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SOURCE Johnson Controls International plc

FAQ

What is the new aggregate tender cap for JCI's cash tender offers?

The new aggregate tender cap is $119 million, increased from $90 million.

When will the tender offers for JCI's senior notes expire?

The tender offers will expire on June 18, 2024.

What are the acceptance priority levels for JCI's tender offers?

The 5.125% Senior Notes due 2045 are Priority 1, and the 4.500% Senior Notes due 2047 are Priority 2.

How much of the 5.125% Senior Notes due 2045 was tendered?

A total of $164.999 million worth of the 5.125% Senior Notes due 2045 was tendered.

What is the proration factor for the 5.125% Senior Notes due 2045?

The proration factor is 72.18%.

Why won't any of the 4.500% Senior Notes due 2047 be accepted?

The aggregate principal amount tendered for the 4.500% Senior Notes due 2047 exceeds the Aggregate Tender Cap.