NEWPORT NEWS, VA - Huntington Ingalls (NYSE:HII) Industries, Inc. (NYSE:HII), a major shipbuilding company, announced today that it has entered into a substantial financial agreement, bolstering its liquidity and financial flexibility. The company has successfully amended and restated its previous revolving credit facility, increasing its borrowing capacity from $1.5 billion to $1.7 billion and extending the maturity date to September 17, 2029.
The new credit facility comes with a variable interest rate linked to the Secured Overnight Financing Rate (SOFR), with an added credit spread adjustment.
The interest spread will vary based on Huntington Ingalls' credit rating, ranging between 1.125% and 2%. Additionally, the company will incur a commitment fee on the undrawn portion of the facility, which will also fluctuate with its credit rating, between 0.125% and 0.30%. With the current credit rating, the interest on borrowed amounts would be SOFR plus 1.375%, and the commitment fee would stand at 0.20%.
This strategic financial move by Huntington Ingalls, which operates primarily in the ship and boat building and repairing industry, signals a proactive approach to managing its capital structure and supporting its long-term business objectives. The credit agreement involves multiple lenders with JPMorgan Chase (NYSE:JPM) Bank, N.A. serving as the administrative agent.
The enhanced credit facility is expected to provide the company with additional operational headroom and the ability to navigate the business landscape more effectively. The details of the agreement are outlined in the Second Amended and Restated Credit Agreement, which is attached as an exhibit to the 8-K filing.
In other recent news, Huntington Ingalls Industries (HII) reported a record second-quarter revenue of $3 billion for 2024, marking a 6.8% increase from the previous year.
The company's diluted earnings per share also rose to $4.38, up from $3.27 in the same quarter of 2023. In addition, HII secured several significant contracts, including a $30 million task order to support the U.S. Air Force's presidential and executive aircraft fleet, and a $209 million contract for the support of the U.S. Air Force's fighter and bomber weapons systems.
Furthermore, HII delivered two REMUS 620 uncrewed underwater vehicles (UUVs) to the National Oceanic and Atmospheric Administration (NOAA) for high-resolution ocean floor mapping. These vehicles are expected to assist in the restoration of deep-sea habitats affected by the 2010 Deepwater Horizon oil spill.
Despite these positive developments, JPMorgan adjusted its stance on HII, shifting the rating from "Overweight" to "Neutral" due to concerns about near-term confidence, while increasing its price target for the company's stock to $285.
InvestingPro Insights
In light of Huntington Ingalls Industries' (NYSE:HII) recent financial restructuring, InvestingPro data reveals a sturdy market capitalization of $10.44 billion, with a P/E ratio of 14.13, indicating a potentially undervalued stock given its near-term earnings growth. The company's revenue has grown by 8.04% over the last twelve months as of Q2 2024, showcasing its ability to increase sales. This financial stability is further highlighted by the company's commitment to shareholder returns, having raised its dividend for 12 consecutive years and maintaining payments for 13 consecutive years.
InvestingPro Tips suggest that while analysts have revised their earnings expectations downwards for the upcoming period, the company's low price volatility and the prediction of profitability this year could make it an attractive option for investors seeking a mix of income and stability. However, potential investors should be aware of the company's weak gross profit margins and the fact that its short-term obligations exceed its liquid assets, which could pose liquidity risks.
For those looking to delve deeper into Huntington Ingalls' financials and strategic positioning, there are additional InvestingPro Tips available at https://www.investing.com/pro/HII. These insights could provide valuable context for the company's use of its enhanced credit facility and its impact on future growth prospects.
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