CDW Corp issues $1.2 billion in senior notes

In a significant financial move, CDW Corp (NASDAQ:CDW), a leading provider in the retail-catalog and mail-order houses industry, has announced the issuance of $1.2 billion in senior notes. The issuance, completed on Thursday, comprises two sets of notes: $600 million of 5.100% senior notes due 2030, and another $600 million of 5.550% senior notes due 2034.

The 2030 notes, which mature on March 1, 2030, were sold at 99.8% of their principal amount and will pay semi-annual interest at a rate of 5.1%. The 2034 notes, maturing on August 22, 2034, were sold at 99.7% of their principal amount, with a semi-annual interest rate of 5.5%. Interest on both sets of notes will start accruing from today, with the first payment due in early 2025.

The notes were issued under an indenture agreement dated December 1, 2014, between CDW, CDW Finance Corporation, and U.S. Bank National Association as trustee, and were supplemented by two additional indentures reflecting the terms of the new notes.

CDW has the option to redeem these notes at any time before their respective par call dates at a price either equal to the greater of a specified treasury rate plus a small margin or 100% of the principal amount, in addition to accrued and unpaid interest. Following the par call date, the notes can be redeemed at 100% of their principal amount plus accrued interest.

In the case of a change of control event coupled with a downgrade of the notes' credit rating, note holders have the right to require the company to repurchase their notes at 101% of the principal amount plus accrued interest.

The indenture agreement includes covenants that restrict CDW's ability to secure debt with certain assets, engage in sale and lease-back transactions, and consolidate or sell significant assets, subject to specific exceptions and conditions.

This move could potentially impact CDW's financial strategy, although the company has not disclosed specific plans for the use of the proceeds from the note issuance. The transaction, reflecting the company's active management of its capital structure, is based on information from a press release statement.

In other recent news, CDW Corporation reported Q2 2024 earnings with a gross profit of $1.2 billion, consistent with the previous year's figures. However, net sales showed a slight decrease of 3.6%, falling to $5.4 billion, and non-GAAP operating income dropped by 3.7% to $510 million.

The company also announced cash tender offers for its outstanding 5.5% Senior Notes due 2024, and 4.125% Senior Notes due 2025. The offers, managed by BofA Securities and J.P. Morgan Securities, are not contingent on a minimum amount of notes being tendered.

Despite challenging market conditions, CDW Corporation maintains a growth focus, aiming to outpace the U.S. IT market by 200-300 basis points. As part of its future plans, CDW intends to return 50% to 75% of adjusted free cash flow to shareholders in 2024. These are some of the recent developments for CDW Corporation.

InvestingPro Insights

As CDW Corp (NASDAQ:CDW) maneuvers through its latest financial strategy with the issuance of $1.2 billion in senior notes, a glance at the company's current market performance can provide investors with a broader context. CDW's market capitalization stands at a robust $30.06 billion, reflecting its significant presence in the industry. Despite a challenging environment, CDW has maintained a consistent dividend policy, increasing its dividend for 11 consecutive years, which is a testament to its financial discipline and commitment to shareholder returns. However, it's worth noting that the company is trading at a high price-to-earnings (P/E) ratio of 27.26, suggesting that the market has high expectations for its future earnings potential.

Investors looking for stability may find comfort in CDW's low price volatility, but they should also be aware of the company's weak gross profit margins, currently at 22.1%. This could indicate competitive pressures or cost challenges in the industry. Furthermore, while CDW is a prominent player in the Electronic Equipment, Instruments & Components industry, analysts have recently revised their earnings expectations downwards for the upcoming period, which could signal a cautious outlook on the company's near-term performance.

For those considering an investment in CDW, there are additional InvestingPro Tips available that delve deeper into the company's financial health and market position. To explore these insights and how they might influence investment decisions, visit https://www.investing.com/pro/CDW for a comprehensive analysis.

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