Zebra Technologies Announces Launch of $500 Million Senior Unsecured Note Private Offering

Rhea-AI Summary

Zebra Technologies (NASDAQ: ZBRA) has announced a $500 million private offering of senior unsecured notes due 2032. The proceeds will be used to repay $172 million in outstanding debt under its revolving credit facility as of March 30, 2024, and for general corporate purposes, including replenishing cash after paying off its receivables financing facility maturing on May 13, 2024. The notes will be senior unsecured obligations guaranteed by certain domestic subsidiaries but will not be registered under the Securities Act of 1933 or sold in the U.S. without proper registration or exemption. This offering targets qualified institutional buyers and non-U.S. persons.

Positive

• Zebra Technologies is raising $500 million in capital through a private offering.
• Proceeds will repay $172 million in outstanding debt, improving financial stability.
• Additional funds will be used for general corporate purposes and cash replenishment, enhancing liquidity.
• The new notes are guaranteed by certain domestic subsidiaries, adding a layer of security for investors.

Negative

• The offering is private and not registered under the Securities Act of 1933, limiting investor access.
• The notes are unsecured, posing a higher risk for investors compared to secured debt.
• Raising $500 million in debt increases the company's overall leverage.
• The need to repay $172 million in outstanding debt indicates significant existing liabilities.

Insights

Financial Analyst

The announcement by Zebra Technologies of a $500 million senior unsecured note offering is a significant move, primarily aimed at debt refinancing and liquidity management. From a financial perspective, issuing senior unsecured notes indicates confidence in the company’s creditworthiness. Senior unsecured notes are debt securities that rank below secured debt but above subordinated debt in the event of liquidation. This means that in case of default, these noteholders will be paid after secured debt holders but before equity holders.

The immediate use of proceeds to repay $172 million of outstanding debt under its revolving credit facility is a prudent move. This reduces interest expenses and improves liquidity. The approach to replenish cash on hand suggests a strategy to maintain financial flexibility, which is important for a tech company navigating rapid market changes and potential acquisitions.

Investors should note that these notes are not registered under the Securities Act, implying restrictions on resale. This is a common practice for institutional-grade debt offerings. The company's ability to secure such a substantial amount through private placement reflects its solid position in the market.

However, it's essential to consider the maturity date of 2032, which extends the company's debt profile into the long term. One should monitor interest rates and market conditions, as they will impact the refinancing of these notes in the future.

Market Research Analyst

For retail investors, understanding the implications of Zebra Technologies' new debt issuance is vital. By opting for a private offering, Zebra targets institutional investors who are more capable of absorbing large debt issuances and may demand fewer covenants. This reduces administrative burdens and costs associated with public offerings.

This move is also an indicator of the company's strategic positioning. The repayment of the receivables financing facility, which matured recently, demonstrates proactive financial management. Using the excess funds for general corporate purposes hints at the company’s intention to maintain operational flexibility, possibly to invest in R&D, expand market reach, or brace for economic uncertainties.

From a market perspective, this issuance reflects confidence in the company's future cash flows and operational stability. However, the long-term nature of these notes (maturing in 2032) means investors should be aware of the potential risks associated with long-term financial commitments, such as changes in economic conditions, interest rate fluctuations and sector-specific risks.

LINCOLNSHIRE, Ill.--(BUSINESS WIRE)-- Zebra Technologies Corporation (NASDAQ: ZBRA) today announced that it intends to offer, subject to market and other conditions, up to $500 million in aggregate principal amount of new senior unsecured notes due 2032 (the “Notes”) in a private offering.

Zebra intends to use the net proceeds from the Notes offering to repay all the outstanding debt under its revolving credit facility, which was $172 million as of March 30, 2024. Zebra intends to use the remaining net proceeds for general corporate purposes, including to replenish cash on hand following the repayment of its receivables financing facility that matured on May 13, 2024. The Notes will be senior unsecured obligations of Zebra and will be guaranteed by certain Zebra domestic subsidiaries.

The Notes and related guarantees will not be registered under the Securities Act of 1933, as amended (“Securities Act”), or the securities laws of any other jurisdiction, and will not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements. The Notes are being offered only to persons reasonably believed to be qualified institutional buyers in accordance with Rule 144A under the Securities Act and to non-U.S. persons in accordance with Regulation S under the Securities Act.

This press release is for informational purposes only and shall not constitute an offer to sell or the solicitation of an offer to buy the Notes and related guarantees. Any offer of the Notes and related guarantees is not being made to any person in any jurisdiction in which the offer, solicitation or sale is unlawful.

Forward-looking Statements

This press release contains forward-looking statements within the meaning of federal securities laws. Statements related to, among other things, the consummation of the offering of the Notes and related guarantees, the use of proceeds from the proposed offering and potential changes in market conditions constitute forward-looking statements. For a description of factors that may cause Zebra’s actual results, performance or expectations to differ from any forward-looking statements, please review the information under the heading “Risk Factors” included in Item 1A of Zebra’s 2023 Annual Report on Form 10-K and other documents of Zebra’s on file with or furnished to the Securities and Exchange Commission. Any forward-looking statements made in this press release are qualified by these cautionary statements, and there can be no assurance that the actual results or developments anticipated by Zebra will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, Zebra or its business or operations. Except as required by law, Zebra undertakes no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future developments or otherwise. We caution you that actual outcomes and results may differ materially from what is expressed, implied or forecasted by Zebra’s forward-looking statements.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240520947612/en/

Investor Contact:

Michael Steele, CFA, IRC

Vice President, Investor Relations

Phone: + 1 847 518 6432

InvestorRelations@zebra.com

Media Contact:

Therese Van Ryne

Senior Director, External Communications

Phone: + 1 847 370 2317

therese.vanryne@zebra.com

Source: Zebra Technologies Corporation

FAQ

What is Zebra Technologies' new offering?

Zebra Technologies announced a $500 million senior unsecured note private offering due 2032.

What will Zebra Technologies use the proceeds for?

The proceeds will repay $172 million in revolving credit facility debt and for general corporate purposes.

When does the receivables financing facility mature?

The receivables financing facility matured on May 13, 2024.

Who are the intended buyers of Zebra Technologies' new notes?

The notes are intended for qualified institutional buyers and non-U.S. persons.

Is the new note offering registered under the Securities Act?

No, the notes will not be registered under the Securities Act of 1933.

What is the current outstanding debt under Zebra Technologies' revolving credit facility?

As of March 30, 2024, the outstanding debt was $172 million.

What type of obligations are the new notes?

The notes are senior unsecured obligations guaranteed by certain domestic subsidiaries.