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

Rhea-AI Summary

Zebra Technologies announced a $500 million private offering of 6.500% senior unsecured notes due June 1, 2032. The offering is expected to close on May 28, 2024, subject to customary conditions. Zebra plans to use the proceeds to repay its $172 million revolving credit facility and for general corporate purposes, including replenishing cash after repaying its receivables financing facility that matured on May 13, 2024. The notes will be guaranteed by certain domestic subsidiaries and are offered under Rule 144A and Regulation S, targeting qualified institutional buyers and non-U.S. persons. The notes are not registered under the Securities Act of 1933.

Positive

• Zebra Technologies is raising $500 million, which can help in strengthening its financial position.
• The company plans to repay $172 million of its revolving credit facility, reducing existing debt.
• Remaining funds will be used for general corporate purposes, potentially enhancing operational liquidity.
• The notes carry a 6.500% interest rate, which may attract investors looking for fixed income securities.

Negative

• Issuing $500 million in senior unsecured notes increases Zebra's overall debt burden.
• The 6.500% interest rate may result in significant interest expense over the duration of the notes.
• The notes are not registered under the Securities Act, limiting their market liquidity.

Insights

Financial Analyst

The issuance of $500 million senior unsecured notes at a 6.500% interest rate is significant for Zebra Technologies. The company plans to use these funds to repay its $172 million revolving credit facility and to cover general corporate expenses. This indicates a strategic move by Zebra to manage its debt more efficiently, possibly lowering overall financing costs over time.

Given current market conditions, the 6.500% interest rate on the notes appears relatively high, reflecting potential investor concerns about risk or general market yield trends. However, it also demonstrates Zebra's ability to secure substantial financing, showing confidence from institutional investors.

Investors should monitor Zebra's debt-to-equity ratio and interest coverage ratio after this transaction, as successful debt management can lead to improved financial stability. Additionally, this move could free up cash flow previously tied to short-term obligations, potentially enabling more flexibility for future investments or acquisitions.

Market Research Analyst

Zebra Technologies' decision to issue senior unsecured notes in the current macroeconomic environment reveals strategic foresight. By addressing its revolving credit facility and replenishing cash reserves, Zebra is ensuring liquidity and operational stability. This can be especially important as companies face economic uncertainty and potential fluctuations in market demand.

The 6.500% coupon rate reflects current interest rate levels and investor sentiment regarding corporate debt. This rate may seem high compared to historical lows but is reasonable given the current economic climate and rising interest rates. For retail investors, understanding how this debt issuance fits within the broader economic landscape can provide insights into Zebra's strategic planning and resilience.

Furthermore, given that these notes are unsecured, investors should consider the potential risk and the company's ability to generate sufficient cash flow to meet interest payments. Zebra's focus on maintaining strong liquidity is a positive indicator but should be balanced against the higher cost of borrowing under current market conditions.

LINCOLNSHIRE, Ill.--(BUSINESS WIRE)-- Zebra Technologies Corporation (NASDAQ: ZBRA) today announced the pricing of its private offering of $500 million in aggregate principal amount of 6.500% senior unsecured notes due 2032 (the “Notes”). The Notes will mature on June 1, 2032, unless earlier repurchased or redeemed in accordance with their terms. The Notes offering is expected to close on May 28, 2024, subject to customary closing conditions.

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 have not been registered under the Securities Act of 1933, as amended (“Securities Act”), or the securities laws of any other jurisdiction, and may 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 timing and consummation of the offering of the Notes and related guarantees and the use of proceeds from the offering of the Notes 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/20240522121354/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 the amount of Zebra Technologies' new note offering?

Zebra Technologies announced a $500 million private offering.

What is the interest rate on Zebra Technologies' new notes?

The notes have an interest rate of 6.500%.

When will Zebra Technologies' new notes mature?

The notes will mature on June 1, 2032.

What will Zebra Technologies use the proceeds from the notes for?

The proceeds will be used to repay $172 million of revolving credit facility debt and for general corporate purposes.

Are Zebra Technologies' new notes registered under the Securities Act?

No, the notes are not registered under the Securities Act.