In a strategic financial move, Baxter International Inc (NYSE:BAX)., a global leader in medical products, entered into a substantial credit agreement on Wednesday, securing a senior unsecured term loan of up to $2.05 billion. The agreement was facilitated by JPMorgan Chase (NYSE:JPM) Bank, N.A., acting as the Administrative Agent, alongside several other financial institutions.
The company, based in Deerfield, Illinois, will utilize the new capital primarily for refinancing purposes, including the repayment of its existing senior notes and floating-rate notes due in November 2024. Additionally, the funds are earmarked for covering certain U.S. tax obligations arising from internal restructuring, particularly related to the anticipated spin-off of Baxter's Kidney Care business.
Baxter's access to the funds is structured in up to three separate draws, with the commitment from the banks set to expire on December 31, 2024, unless conditions such as the completion of the refinancing or restructuring transactions, among others, lead to an earlier termination.
The terms of the credit specify that the loan will mature on the earlier date of 364 days following the first draw or November 24, 2025. The interest rate on the loan is contingent on Baxter's long-term debt ratings and is subject to increase starting January 1, 2025. Additionally, a ticking fee will accrue on the undrawn amount, also tied to the company's debt ratings.
Baxter is obligated to repay the advances with net cash proceeds from certain transactions, which includes the potential separation of its Kidney Care business. The credit agreement imposes several financial and other covenants on Baxter, such as maintaining a net leverage ratio, and includes customary events of default.
In other recent news, Baxter International has been the subject of several analyst adjustments. Morgan Stanley (NYSE:MS) downgraded Baxter stock from Equalweight to Underweight, expressing concerns about the company's financial outlook and its ability to meet market expectations for margins. On the other hand, Goldman Sachs (NYSE:GS) reiterated its Neutral rating on Baxter, maintaining a price target of $36, and expressed confidence in the company's operational fundamentals. TD Cowen also downgraded Baxter's stock from Buy to Hold due to performance concerns in the Hospital Services and Technologies segment.
Baxter reported strong financial results for the first quarter of 2024, with global sales increasing by 2% on a reported basis and a 3% rise at constant currency rates. The growth was primarily driven by the Medical Products and Therapies segment and the Pharmaceutical segment.
The company also received U.S. Food and Drug Administration (FDA) approval to expand the use of its Clinolipid to pediatric patients. This expansion extends the use of Clinolipid, which was previously available for adults since 2019, to patients of all ages who require intravenous nutrition.
InvestingPro Insights
Baxter International Inc. has been a steady player in the healthcare industry, and recent financial moves reflect their ongoing strategy to strengthen their capital structure. According to InvestingPro data, Baxter boasts a market capitalization of $18.12 billion and a robust revenue of $14.89 billion over the last twelve months as of Q1 2024. Notably, the company has maintained a consistent dividend payout for 54 years, with a current dividend yield of 3.25%, a testament to its commitment to shareholder returns. An InvestingPro Tip highlights that Baxter has raised its dividend for 7 consecutive years, underscoring its financial stability and attractive proposition for income-focused investors.
While the company's P/E ratio stands at a modest 6.82, the adjusted P/E ratio suggests a challenging last twelve months with a figure of -353.78. However, analysts are optimistic about the company's future profitability, with expectations of net income growth this year. Moreover, with a low price volatility, Baxter's stock might appeal to investors seeking a more stable investment amidst market fluctuations. For those interested in further insights and tips, including an analysis of Baxter's position as a prominent player in the Healthcare Equipment & Supplies industry, InvestingPro offers additional information. Use coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, and unlock the full potential of InvestingPro, which includes 6 more tips for Baxter International Inc.
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